13.06.2013
By Ben Hughes
The CDFA has teamed up with Community Development Foundation, to develop a new kind of economic model – community economics. Why? Because with three years of economic stagnation, the risk of triple dip recession and very weak long term growth forecasts – not to mention the poor deal the financial services industry offers those outside the mainstream – a new way to grow the economy, able to work for the masses as well as the powerful few, is needed, and needed now.
Community Economics is a model that harnesses the skills, knowledge and capability present in all communities; it has the potential to bridge the gap between rich and poor that current, free market economics create, and that we know is failing an increasing percentage of the population denied access to the finance needed to create jobs, opportunity and capability.
There are certain key features to sustaining this type of economic activity:
- Viewing local supply chains as the route to growth, funded through locally-driven, mutually owned financing models such as crowd funding, patient capital, community share issue, asset transfer and community finance.
- Establishing Community Banks – made up of CDFIs, credit unions and social investment finance intermediaries (SIFIs). Investment will be supported through Community Finance Partnerships, which bring together social landlords, community groups, CDFIs, advice agencies and local community foundations. Oversight and regulation will be driven by FCA, working through and with an expanded national infrastructure for social investment, able to convincingly channel bank and other mainstream investment efficiently and safely into Community Banks.
- Measuring and recording community economic impacts through double bottom line social accounting
- Using the forthcoming disclosure of bank lending data to identify capital deserts, and target inward investment accordingly. This should be funded through a new Community Investment levy of .25% placed on bank profits, as part of revisions to Corporation Tax, which will ensure a sustainable flow of investment into our most under-invested communities.
- Incentivising on-going investment through the introduction of a ratings system that will grade the value, volume and type of investment made by banks, to make community banking and the community economics they invest in, the corner stone of UK’s economic recovery.
The delivery mechanism is already there; it’s just a question of bringing different providers together in a new integrated whole, to better meet the needs of those communities in which CDFIs are based. The capital? Well, with the greater body of evidence that this model will give us, combined with an established route to market, we offer in one package precisely what major investors have been asking for these last few years – a robust, nationally coherent delivery chain that’s rooted within communities. Oh, and that is kite marked for quality and is sufficiently capitalised to ensure long term financial strength. This is the next generation CDFI.