By Ben Hughes, CDFA
01.05.2014
It won’t have escaped your notice to see the pace at which the financial services landscape has shifted. With new regulatory architecture, new government schemes like the British Business Bank, politicians of all parties setting out their ideas for reform combined with the very welcome addition of mainstream bank lending data being released on a postcode level, one might think the industry really has got its house in order and heeded the lessons of 2008. And to some extent, you’d be right – there has been change and broadly for the good. But we remain a long way from having the type of financial provision that serves all of our communities and that acts as a genuine resource for all, including those individuals, businesses’ and homeowners denied access to the mainstream.
It’s encouraging to hear the likes of Martin Wheatley, CEO of FCA publicly pronounce that a key role for the regulator is to put the ethics back into finance. You’d not have heard that from the FSA back in the dark days of the last decade – never mind from the CEO – but pronouncements are easy; it’s changing behaviour and achieving real change that’s the hard bit.
Enter the network of CDFIs; an active industry of 70 institutions, highly autonomous and serving very different markets but united by a common commitment to serving the underserved, and ‘doing’ the access to finance role that so many are now talking about (and thanks go to Justin Welby on helpfully raising the temperature here) Their 2013 activity says it all; they ‘did’ £123m of lending to over 9,000 of the nation’s most cash-starved enterprises, and through their £20m of lending to low income individuals saved 40,000 people from paying £8m in interest.
But this remains a small fraction of what’s required to level the industry playing field, and ensure money and support flows in the way necessary to drive a vibrant, suitable 21st century economy. We as an industry and community need to make much more noise – about the great work that CDFIs and others are doing, as much as about the vast gap that continues to exist and which they are so clearly capable of filling.
In 2012, the CDFA launched a mini-manifesto, Just Finance, It laid out some key policy asks necessary to fill what we then thought was the gap in provision. 2 years on and – despite those changes referred to above – many of those asks remain un or only partially answered, with consequences that continue to fill our daily headlines.
Given this, and next year’s election, we realised we needed to re-pressurise the debate; thanks to the ongoing support and vision of LankellyChase foundation, we have produced Just Finance II – a review of progress (both ours and others) but also a call for renewed action, stressing the urgency of:
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boosting competition to dilute the over-concentration of the big 5
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creating the legislation necessary to drive community investment
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providing clarity for customers when navigating credit options
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reducing the cost of credit for lower income individuals and cash strapped enterprises
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increasing capitalisation of the community finance sector, and
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building a fit-for-purpose infrastructure, truly designed to support provision of just finance.
The absence of these continues to create a drag on our economy – entrepreneurs are being held back and money is syphoned out of already under-invested communities. Meanwhile, policies meant to address failure in our financial markets, such as Funding for Lending or Quantitative Easing, have been criticised for doing as much harm as good.
Just Finance II calls on HM Treasury, the Bank of England, the Financial Conduct Authority, banks, the Department for Communities and Local Government, Big Society Capital, the Big Lottery Fund, Local Enterprise Partnerships, local authorities, city mayors, trusts and foundations as well as private investors, to join us in ensuring just finance for all.
Just Finance II will be released in summer 2014.