29 July 2011
The Community Development Finance Association (cdfa) applauds Vincent Cable’s speech this week which encouraged banks to seek stronger relationships with Community Development Finance Institutions (CDFIs).
In his speech made earlier this week, Mr. Cable said, “Diversity is another key antidote. The gradual decline in relationship banking needs to be reversed. Part of the answer may lie in the new challenger banks – like Handelsbanken – but another key element may be more community lending, through Community Development Finance Institutions (CDFIs) and credit unions. The government is encouraging them, through a new £60m fund to help finance CDFIs, a tax relief on this form of lending, and encouraging big banks to partner with them, such as with the Greater Manchester SME Loan Fund*.”
The launch today of the Big Society Capital, with anticipated funding from unclaimed assets of £400million, and £200million provided by the “Merlin Banks”, also strongly demonstrates the importance of innovative forms of finance delivering social impact. CDFIs therefore represent a vital part of the Big Society.
Ben Hughes, interim CEO of cdfa said,
“Mr. Cable’s speech signals a strong backing for relationship banking, which cdfa believes is vital to ensuring that loan deals continue to be provided in areas of high deprivation in the UK. However the investment readiness for small businesses in those areas is crucial from the perspective of the banks if they are to be encouraged to make higher risk loans.
“In addition, today’s launch of the Big Society Capital is an exciting example of what can be achieved when Government and Britain’s major retail banks work together to improve the pool of available funding for organizations in this country which have a social impact. While this is an important development, both need to continue to support the infrastructure for local social lending which in practice requires direct investment into CDFI’s.”
*Greater Manchester LEP partners are addressing financial market failure in Small to Medium Enterprise lending through a groundbreaking partnership between a, BIS (DTI)-established, CDFI, Business Finance Solutions (BFS), the RBS Group plc and five other banks to gain access to a rich source of “currently unbankable” but viable businesses seeking finance.