CDFIs Generate £100m of 'Extra Value' for the Local Economy Through RGF
8th September 2014
- CDFIs generate £100m of 'extra value' for the local economy through Regional Growth Fund
- A further £150m government lending pot could unlock thousands more jobs
Community lenders have generated over £100m in 'extra economic value' through a government-backed fund supporting small businesses and social enterprises in England.
Figures from the Community Development Finance Association (CDFA) have revealed that loans made by its members have delivered economic value worth more than five times the original funding [1].The funding has already secured over 2,600 jobs for English towns and cities, creating substantial benefits for the government and local economies.
The loans were made possible through the £60m Regional Growth Fund (RGF) - £30m of which is funded by the government, alongside £15m each from Unity Trust Bank and the Co-operative Bank.
With £17.3m lent so far, the RGF funding is punching above its weight in impact to small and micro businesses and social enterprises.
The funding has so far created 352 jobs and secured 2,266, benefitting 699 businesses. It is expected to secure a total of 8,000 jobs over six years – which will create an estimated economic boost of over £320m.
Small businesses in the UK create 60% of jobs and 50% of GDP [2], but micro enterprise and SME loan application rejection rates from mainstream banks have soared from around 5% in 2004 to upwards of 20% in 2012 [3], as many small and micro businesses struggle to access funding from high street banks.
Ben Hughes, Chief Executive of the CDFA, said: "Community Development Finance Institution (CDFI) lenders are stepping up to fill the gap in available finance and the potential for further growth is immense. We are calling on the government to reinvigorate its commitment to economic growth in communities across England with a further £150m of funding. The value added demonstrates that providing loans through the alternative finance sector is the best way to turn government funding into long-term sustainable finance for local communities and businesses.
“A new annual £150m fund is vital to expand, replicate and sustain community finance and more importantly for the development of sustainable local enterprises and local jobs. This could unlock significant private sector investment of up to £600m."
Peter Kelly, Business Development and Marketing Director at Unity Trust Bank, said: “Unity is proud to be the leading provider of commercial funding to the CDFI sector. The social economy is a powerful engine for growth and is driving positive social change through enterprise and job creation. Important programmes such as the RGF have enabled CDFIs to provide improved access to affordable finance and Unity is delighted to be playing its part in this success story.”
Paul Martin, National Manager of Charities and Social Enterprise
Banking at The Co-operative Bank, said: “As a Bank with values and ethics at the heart of our business, we fully understand the important role small businesses and community based organisations play in ensuring our communities survive and thrive. We are pleased that through our continued involvement in the Regional Growth Fund, we can further extend our support to these dynamic sectors through wholesale lending to enterprise CDFIs.”
Almost half of loans made, by value, are in the West Midlands region, 16% are in the North West, with the remainder disbursed throughout the rest of England.
Businesses can find out more from www.findingfinance.org.uk.
Sources:
[1] The funding has created 352 jobs and secured 2,266. Each job created has a value of £28,417 to the economy, and each secured is worth £42,305, giving the economy a boost of £100m in value. This data is taken from the CDFA's forthcoming publication 'CDFI Economic Impact Tool' funded by Citi.
[2]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/32219/10-1243-backing-small-business.pdf
[3]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/193945/bis-13-857-evaluating-changes-in-bank-lending-to-uk-smes-2001-12.pdf
There are 17 CDFIs involved in delivering the programme.
The Community Development Finance Association (CDFA) is the voice for providers of fair and affordable finance. We represent and support a national network of community development finance institutions or CDFIs. Our mission is to support the development of a thriving and sustainable CDFI industry that provides finance for disadvantaged and underserved communities, bringing wealth, well-being and economic prosperity to these areas.
www.cdfa.org.uk
CDFIs lend money to businesses and people who struggle to get finance from high street banks. They are social enterprises that invest in customers and communities. CDFIs create jobs and help businesses to start and grow.
About RGF
The Regional Growth Fund (RGF) is a flexible and competitive £3.2 billion fund operating across England from 2011 to 2017. It supports projects and programmes that are using private sector investment to create economic growth and sustainable employment. For further information please visit: www.bis.gov.uk/rgf
Unity Trust Bank
Unity Trust Bank is a specialist bank for civil society, social enterprises, CICs, councils, and trade unions. It supports customers with socially responsible banking services. And because it is a social enterprise in its own right, the bank understands the sectors its customers work in.
Unity Trust Bank is a Living Wage accredited employer. The first bank to do so, this confirms Unity's commitment to paying its employees the UK living wage or more.
For more information, visit: www.unity.co.uk
About The Co-operative Bank
The Co-operative Bank plc provides a full range of banking products and services to almost 5 million retail and SME (Small and Medium Sized Enterprises) customers. The Bank is committed to values and ethics in line with the principles of the co-operative movement.
