‘Growing confidence in alternative finance’ as ethical lending grows

New research shows that while bank lending may be falling in the UK, loans from Community Development Finance Institutions (CDFIs) have doubled in two years – to the tune of almost £1 billion.

A study by the Community Development Finance Association (CDFA), the trade body for CDFIs, describes community-based lending as a “vital part of the financial landscape”.

CDFIs are businesses that help finance small and medium sized enterprises (SMEs) and individuals who are unable to borrow from high street banks or mainstream loan companies.

“While Bank of England lending figures show that banks are lending less and less to SMEs, CDFIs have continued to increase lending – helping 45% more customers year on year”, said Ben Hughes, Chief Executive of the CDFA.

“They are boosting local economies at a crucial time for the UK and are providing loans and support to businesses where banks have moved away. By creating jobs and nurturing new businesses, CDFIs are quietly changing people’s lives.”

The CDFA points towards an example of a caravan manufacturer in Hull, Atlas Leisure Homes, which successfully secured a CDFI loan from the Acorn Fund. This enabled it to buy more machinery, and in turn, expand its workforce.

Commercial director Andrew Innes described the CDFI support as “invaluable” at a time when Hull’s caravan manufacturing industry was going through a tough period.

Unity Trust Bank – a bank that lends to businesses in the social economy – featured in Blue & Green Tomorrow’s Guide to Sustainable Banking 2012. Peter Kelly, executive director of business development, said the organisation was “encouraged by the growing confidence in alternative finance”.

He added, “CDFIs play a vital role in providing finance and support to those individuals and businesses whose access to mainstream banks is limited.

“This report shows that demand is increasing, and through our ongoing support for CDFIs we will continue to promote fair lending, job creation and economic prosperity in communities around the UK.”

Further reading:

London Green Parties to move money to ethical banks

More competition in banking could save small firms

‘Good Investor’ guide launched for socially-motivated investors

Merging the great business dilemma: profit v sustainability, responsibility and ethics

The Guide to Sustainable Banking 2012