11 November 2021 – In this week’s Westminster Hall “SMEs: Access to Finance” debate, Peter Gibson MP, Vice-Chair of the APPG on Fair Business Banking, said:
“We must deliver a strong local finance option for businesses in the UK. We cannot continue to deprive hungry and ambitious businesses of access to finance and scaling up, simply because they do not have access to the right financial product. We need to provide capital to community development financial institutions and regional mutual banks, to allow them to increase their offering.”
Gibson added:
“Community development financial institutions are private finance institutions that are dedicated to providing responsible, affordable lending to disadvantaged communities and individuals. They do not prioritise profit, but prioritise allowing local-income areas to flourish. By providing finance as well as financial support and knowledge, CDFIs look at the wider benefits that each SME can provide to its local area, financing businesses that can make the biggest impact, even if they have been rejected by the big four.”
Responding for Government, Minister for Small Business Paul Scully welcomed the debate and agreed access to finance is “undoubtedly skewed” towards London and the South- East and this must be rectified.
He was vocal in his support of CDFIs who play a “massive role in the landscape of alternative lenders.”
Pat McFadden, Shadow Economic Secretary to the Treasury, agreed CDFIs have a very important role to play in this debate, and have already proved successful in stepping in where main high street banks are unable to help.
Theodora Hadjimichael, CEO of Responsible Finance which represents CDFIs in the UK, said:
“SMEs, the backbone of our economy, do not have equal access to finance and scale up opportunities. Many stay small because it is too hard and demoralising to figure out where to get finance. The result? Fewer jobs locally, less innovation and competition, and less wealth created in places already struggling to play economic catch-up.
“The debate highlighted the importance of a diversity of lenders, “local solutions to local problems”, partnerships between government and the broader finance sector, and that this already happens in most other G7 countries. It’s a must-do to level the playing field for all the places and people with ambition and amazing businesses but unequal access to the finance they need.
“CDFIs have a superb track record of reaching businesses underserved by mainstream and challenger banks; 9 in 10 of our customers have previously been declined and 85-90% go on to fully repay their loan and succeed – many then become banks’ customers. The US government is actively using their CDFI sector to invest into places and reduce inequality.
“Scaling-up the UK’s CDFIs could help create over 65,000 new jobs and return £8 to the Treasury for every pound spent – it’s the biggest lever to pull for meaningful levelling-up.”
What next?
- Journalists and media: numerous case studies of thriving businesses supported by responsible finance providers (CDFIs) are available. For case studies or comment requests contact Jamie Veitch.
- More about the All-Party Parliamentary Group (APPG) on Fair Business Banking and its recent report.
- Businesses seeking finance: visit www.findingfinance.org.uk