Chief Secretary to the Treasury Danny Alexander has today (23 February 2015) announced that the British Business Bank is commissioning new independent research for a report on the sustainability of Community Development Finance Institutions (CDFIs). It will report on its findings in June. CDFIs offer loans for viable small businesses struggling to secure finance from mainstream lenders.
Last year, Community Development Finance Institutions (CDFIs) lent £72m to small businesses and microenterprises, creating over 15,000 jobs.
Some CDFIs have already successfully secured commercial investment. The report will look into how the CDFI sector can build on these successes and attract more commercial investment in the future, which will provide a long-term funding option for the sector. It will draw on examples from the US, where they have a thriving community finance sector.
The Chief Secretary made the announcement on a visit to Fredericks Foundation in Oxford. Fredericks Foundation is an ethical microfinance charity. It provides affordable loans and support to enable people to start or grow their own small business when they cannot get finance from mainline lenders. Many people are financially excluded or face multiple barriers to employment, and Fredericks provides a route to financial independence through self-employment. Fredericks delivers these loans across much of England, and have now made over 1200 loans, creating and protecting over 2000 jobs in the process.
On the visit, the Chief Secretary met several small business owners, including Natalie Tate. Natalie, having been refused funding from a bank, contacted the Fredericks Foundation who lent her £9,000 to set up her mobile dog wash and grooming service, ‘the dog pod’.
Chief Secretary to the Treasury, Danny Alexander said:
Small businesses are the backbone of the British economy, so it’s only right that the government supports viable small businesses, particularly those struggling to access conventional finance.
To ensure we help our small businesses as much as possible, I have commissioned a report exploring how the CDFI sector can operate more sustainably. This will provide more evidence about the sector and building on this, CDFIs will be able to help even more viable smaller businesses access the finance they need to grow.
Economic Secretary to the Treasury, Andrea Leadsom said:
This government is firmly behind small businesses – that’s why we’re looking at how we can further support the community finance sector. Community Development Finance Institutions (CDFIs) help viable businesses and social enterprises that are unable to secure lending from high street banks. They also provide help to households that need to meet unexpected expenses and might otherwise use payday lenders. Last year CDFIs created 15,000 jobs and it’s only right that we look at how we can ensure that the sector continues to thrive.
Frederick’s CEO, Charles Dodwell said:
We welcomed Danny Alexander’s visit today. So much of what we do is below the radar, and rarely gets publicity. But we enable people to change their lives for the better, and create jobs and businesses. It is extremely helpful to be recognised by the government in this way. The Chief Secretary heard some truly inspiring stories today.