“THEY BELIEVED IN ME.” Responsible Finance Impact Report 2023
CDFIs are mission-driven lenders. Each and every CDFI is a social enterprise. They play a vital and growing role turning a “no” from banks and other lenders into a “yes.” When others are pulling down the shutters, CDFIs dare to lend, making informed, evidence-driven decisions.
20% increase in lending and 22% growth in customer numbers.
CDFIs work in the more deprived areas of the UK and most of their loans are made outside of London and the South East. Through their activities, CDFIs contribute to:
- Increasing business activity in deprived areas, resulting in increased wealth in communities
- Increasing job opportunities in low-income communities, boosting incomes and life chances
- Improving community wellbeing and social cohesion through fostering social enterprises
- Increasing financial stability and reducing reliance on predatory lending
- Reducing poverty and increasing income through reduced interest repayments and enabling people to identify unclaimed benefits
- Increasing the use of renewable energy in low-income communities, resulting in reduced greenhouse gas emissions
1. UNLOCKING OPPORTUNITY:
LENDING TO BUSINESSES
Twenty CDFIs lend to start-ups and established small businesses to create value in communities by increasing access to capital.
jobs created and safeguarded
of loans made to women-led start-ups and businesses
of loans made to ethnic minority-led start-ups and businesses
United Nations Sustainable Development Goals supported:
Customer Story
Etika Clothing wants every child in the UK to have the opportunity to wear an ethical uniform.
The business is built on a unique manufacturing partnership between the UK and India, with full supply chain transparency.
This means safe working conditions and good salaries in its factory. Etika also subsidises uniforms for children living in financially vulnerable households, and supports vulnerable women who are survivors of domestic abuse.
A £20,000 investment in April 2022 from CDFI NEL Fund Managers helped Etika enhance its business development activity and employ a skilled team to meet growing demand.
2. CREATING THRIVING PLACES:
LENDING TO SOCIAL ENTERPRISES
Eleven CDFIs and social banks fill a market gap through lending to social enterprises: businesses with a core socssial or environmental purpose.
hours of support provided to social enterprises
of social enterprises supported were based outside London and the South East
of social enterprises supported were based in the UK’s 35% most disadvantaged areas
Community
Services
Housing and Accommodation
Employment, Education and Training
United Nations Sustainable Development Goals supported:
Customer Story
Omnis Circumvado CIC is a specialist sports coaching company. The firm works with children, young people, and adults who have the most complex needs, providing inclusive and adapted sporting opportunities.
Clients include schools, community groups and adult day centres. Its activities are also preventative, and in-person impact is critical. Like many social enterprises it adapted during the pandemic so it could continue to give people the vital support they needed.
A loan and grant package from CDFI Key Fund had enabled the firm to develop. The Social Enterprise Recovery Fund meant it could continue operating after the pandemic, and take on an apprentice, with additional needs, who had not previously been in employment, education or training.
3. IMPROVING LIVES:
LENDING TO INDIVIDUALS
Eight CDFIs make personal loans to individuals who don’t have a financial safety net. A small loan which they can repay over a few months can be the only way to buy a large item like a fridge or pay a one-off cost like a car repair.
£46 million lent to 90,000 customers and £4 million lent to 465 homeowners in 2022.
United Nations Sustainable Development Goals supported:
Customer Story
Charlene works for the NHS in Oldham and applied to Salad Money for a loan. But she got a pleasant surprise when the firm used her application information to calculate whether she was claiming all the benefits she is entitled to. It revealed she was missing out on £800 every year.
Salad Money uses Open Banking data and its own software for affordability assessments, rather than credit scoring. It is one of several CDFIs which have embedded a benefits checker into their application processes and has helped many applicants identify hundreds of millions of pounds they were rightfully due but not claiming.
4. BACKING A JUST TRANSITION TO
NET ZERO EMISSIONS
A just transition to net zero is one which is fair and inclusive, not leaving anybody behind. Finance is widely acknowledged as being critical for unlocking the UK’s transition.
CDFIs empower communities to drive their own decarbonisation. They have catalysed community-owned energy schemes, green technology innovations, emission-reducing projects and
the installation of household insulation and renewables. Across lending to small businesses, social enterprises and consumers, CDFI funding is a tool for the just transition.
United Nations Sustainable Development Goals supported:
Customer Story
Alpkit is a business success story which has doubled employee numbers to 200 between 2020 and 2023, all while dramatically reducing its absolute emissions and carbon intensity.
The firm makes and sells outdoor equipment. Since securing and repaying two loans from CDFI First Enterprise – Enterprise Loans it has grown and repaying two CDFI loans it has grown to 200 employees, opened new stores across the UK, and developed significant international sales. Between 2020 and 2023 it halved its total greenhouse gas emissions – eight years ahead of a 2030 target set by The Science Based Targets initiative (SBTi); reduced carbon intensity by more than 36%; and set a path to achieve true net zero in line with SBTi deadlines.
5. HOW CAN WE SCALE UP CDFIS’ IMPACT?
CDFIs are agile and responsive. They make strong reliable partners because they have unique reach into underserved markets, they have a track record, measure their results and are focused on getting the very best outcome for their customers. Policymakers, banks, stakeholders – here is what you can do to scale up the CDFI sector’s impact:
- Target portions of the expanded Dormant Assets for Social Investment and Financial Inclusion to scaling up CDFIs to turbocharge their impact.
- Exempt all Community Finance Organisations from payment of Financial Ombudsman Service Case Fees.
- Back the Fair Banking Act to ensure the UK’s retail banks take action to tackle financial exclusion.
- Expand Community Investment Tax Relief to personal lending CDFIs to attract new investors.
- Extend the credit broking exemption to reroute more people away from high-cost and illegal lenders.
- Require banks to signpost customers they cannot support to CDFIs.