Today’s King’s Speech sets out the Government’s plans to control the cost of living and support British business as part of a “country fair for all”. This is a major opportunity to support individuals and businesses in need and drive economic growth that works for everyone. Responsible Finance highlights the role of Community Development Finance Institutions (CDFIs), a fast‑growing sector that delivered £322.6m in lending in 2024 alone, supporting thousands of businesses and individuals struggling with costs and injecting new life into underserved local economies – often where mainstream finance falls short.
A new Enhancing Financial Services Bill and a new Regulating for Growth Bill, building on the 2025 Regulation Action Plan, are expected to modernise how the sector is regulated and unlock growth through smarter regulation. With the Government keen to also raise living standards across the UK, the next step is clear: scale up support for CDFIs, strengthen bank partnerships, and accelerate the flow of affordable finance into communities to power a more inclusive and resilient economy.
“Money makes the world go ‘round”, so it makes sense that lowering prices for working people and reform for growth are expected to be key features of the next parliament. For money to make everyone’s world go ‘round, there’s an opportunity to ensure the UK’s financial system works for everyone, not just for those well served already. We are encouraged by the Government’s focus on the cost of living, which has seen household and business costs soar over recent years. An estimated 20.3 million people in the UK – 44% of adults – are now living in financially vulnerable circumstances, an increase of 16% since 2022. A lack of affordable credit access means routine costs or unexpected shocks can push people into problem debt, where they face a “poverty premium,” paying more or being excluded altogether.
CDFIs lift up communities by supporting job creation and business growth across the UK, strengthening household financial resilience, enabling social enterprises to maximise impact, and boosting productivity. They play a vital role in reaching those excluded from mainstream finance – in 2024, 94% of CDFI’s small business customers and 89% of social enterprise customers had previously been declined by a bank. Much of this support is directed where it is needed most, with 46% of small business lending and 67% of social enterprise lending going to organisations in the UK’s most deprived areas.
Acknowledging the importance of small businesses, the Government announced legislation to tackle late payments through a Small Business Protections (Late Payments) Bill. Responsible Finance welcomes this focus, noting the harm late payments cause to SMEs by driving reliance on high-cost debt, and urges the Government to consider the impact on social enterprises as well.
At Responsible Finance, we see every day the difference that CDFIs make – providing fair, affordable credit to people and places that mainstream finance too often overlooks. CDFIs consistently reach customers mainstream finance won’t – for example, 94% of the businesses they lend to could not get investment elsewhere. Despite their size, they deliver outsized outcomes – last year, CDFIs:
- Kickstarted 4,909 new enterprises and helped to create 7,212 new jobs
- Gave affordable personal loans to 134,896 people, saving borrowers £50.8m compared with using a high-cost lender
This shows CDFIs are a small but mighty part of the financial system – a fast‑growing sector delivering record lending, supporting thousands of businesses and jobs, stepping in where mainstream finance won’t, and making a compelling case for scaling what already works. As Government looks to drive economic growth and security, it must seize this moment to recognise and support the vital role of CDFIs.
The new Enhancing Financial Services Bill is aimed at unlocking growth and improve efficiency. It builds on the Government’s Financial Services Growth and Competitiveness Strategy, a 10-year plan to strengthen competitiveness, innovation, and growth. The Bill will include:
- Reform to the Financial Ombudsman Service to increase consistency and clarity of decision-making and resolve disputes more quickly. This could create a more supportive lending environment. However, no exemption from the £650 case fee has been proposed, despite this posing a disproportionate burden on CDFIs with small loan sizes and tight margins, highlighting the need to extend fee exemptions to those operating at scale.
- Updates to the statutory framework underpinning the ring-fencing regime to unlock more finance for UK businesses. Improved competition in SME lending is aimed at helping small businesses access finance.
- Consolidating the Payment Systems Regulator within the Financial Conduct Authority (FCA) so firms will deal with fewer overlapping regulators for clearer accountability and faster decision-making.
- Reducing the burden of the Senior Managers and Certification Regime – the framework that holds senior leaders in financial firms accountable – by 50% with a focus on accountability of the most senior figures in financial services.
- Credit union expansion by improving the rules on who can become a member.
Responsible Finance welcomes the commitment to reform financial services – they’re the financial plumbing that keep money flowing, enabling businesses, households, and communities to function and thrive. Increased collaboration between two parts of the financial services sector – mainstream banks and CDFIs – shows the value of more flexible, locally informed lending in reaching underserved communities and supporting future customers of the banking system. Strengthening this ecosystem – whether through voluntary partnerships or legislative incentives – offers a significant opportunity to expand access to affordable finance and drive inclusive growth. We also therefore welcome the commitment to partner with business and enable reforms that support higher growth and a fair deal for working people. It is now up to the financial services sector to collaborate to improve access for those most at risk and who have a lot to gain.
International experience, such as the United States’ Community Reinvestment Act (CRA), demonstrates how policy can successfully encourage such collaboration and channel greater investment into underserved areas, therefore increasing economic opportunity. There is currently no equivalent legislation in the UK, although a coalition is advocating for the introduction of a UK Fair Banking Act inspired by the CRA. Partnering with CDFIs – which those financial institutions on the Community Finance Taskforce are already moving towards – presents a significant opportunity for banks to develop impactful collaborations that expand financial inclusion and support broader economic growth and a wealthier society.
The commitment to use public investment to attract further private investment, presents an opportunity to build on this progress and unlock affordable credit by ensuring proportionate regulation and support for community lenders alongside mainstream providers. We urge the Government to use the forthcoming changes to:
- Explicitly recognise CDFIs as essential to improving access to finance and reaching underserved communities and embed community finance within mainstream financial services
- Work in partnership with the CDFI sector to ensure reforms strengthen the community finance sector, enabling CDFIs to scale their impact
- Improve access to capital for CDFIs by expanding existing programmes, such as the Community Investment Tax Relief (CITR), the Growth Guarantee Scheme (GGS) and by introducing additional long-term funding mechanisms to support sustainable growth across the sector
- Encourage more bank-CDFI partnerships, including potential legislation like the US’ Community Reinvestment Act that creates a win-win for banks and society.
- Support measures that increase consumer access to safe, fair alternatives to high-cost credit, particularly for households facing financial vulnerability, as part of wider financial inclusion objectives
- Maintain strong consumer protections. Effective reform requires smarter, more accountable regulation rather than simply less of it.
Collectively, these measures would help build a stronger, more inclusive and resilient financial system that works for all.
If the Enhancing Financial Services Bill announced today is to deliver on its promise, it must put inclusion at its heart, which means backing community lenders who are already doing the work on the ground. We believe these measures should form a central part of the Government’s economic security agenda.
See our full range of policy asks in our 2026 interactive impact report and get in touch if you would like to support the work of Responsible Finance.