CDFIs have benefited from favourable government support, but those days are clearly over.
Banks must fill the void left by government spending cuts to ensure enterprises in the UK’s poorest neighbourhoods can access finance, according to the new CEO of a trade association for community-based lenders.
Ben Hughes, who started his job as interim CEO of the Community Development Finance Association (cdfa) last week, said a business case needs to be developed that would convince banks that investing in under-served markets would be good for their own success.
Hughes, who replaced former CEO Bernie Morgan, said: ‘It is crucial that community development finance institutions [CDFIs] forge even stronger relationships with banks. To date, CDFIs have benefited from favourable government support, but those days are clearly over.
‘CDFIs have been successful in nuturing their relationships with banks, but on the other hand they are also mindful of the fact that banks’ current level of investment into the sector is just a pittance. It is just crumbs really.’
He added: ‘While there is clearly a power inequality in all of this, we [the CDFI sector] have so far failed to capitalise on why investing in our members is good for their own business. Not only would it help rebuild public trust on the one hand, there is also a clear business case because social lenders are in the business of growing new markets for the banks.’
However, Hughes would not be drawn on whether he would support the introduction of US-style legislation to compel banks to offer finance in the most deprived neighbourhoods. It is a matter on which the cdfa’s membership has historically not agreed.
Hughes, who was formerly CEO of BASSAC, which merged with the Development Trusts Association to form Locality, said CDFIs also need to build a business case for social housing providers, community-based organisations, health services and training providers.
One of the first challenges for Hughes will be to help the cdfa become financially secure for the future, he said. ‘We have got to develop a sustainable model. The organisation is in a very good financial state because the board’s prudent approach prevented us from being thrown into turmoil, but we need to prioritise developing a sustainable model.’
Hughes was unsure how long the interim post of CEO would run, but confirmed he could be interested in the post permanently. ‘If the board is enthusiastically up for real change, I could be interested,’ he said.
Article taken from Social Enterprise Magazine, 15th June 2011