Imagine borrowing £100 – but then paying back £50 per month for 6 months to pay off the loan. After 6 months, you’ll have handed back interest of £200 in addition to the original £100 of capital – in other words, the loan will have cost you a shocking 534% APR. Certainly this isn’t a fair interest rate. But for many people with poor credit ratings – or even simply by virtue of being self employed – expensive doorstep lenders charging upwards of 500% APR (sometimes as much as 4000% APR!) are the only options when they need an emergency loan.
Access to finance is of course an issue for businesses and social enterprises – and the gap between the availability of affordable finance and demand from viable, credit-worthy customers is increasing.
- 40% of small businesses seeking their first loan cannot get one
- 33% of social enterprises are hampered by the lack of finance
- 38% of underbanked people turn to high-cost lenders
At a time when mainstream bank lending is ever harder to come by and exploitative lenders are burgeoning, CDFIs – Community Development Finance Institutions – social enterprises that invest in markets underserved by mainstream financial institutions, can play a pivotal role in supporting less-well-off communities and the economic recovery of the nation. They’re the unsung heroes of the financial services sector. Yet although increase in community finance is increasing, many CDFIs are struggling.
The organisation which represents and advocates on behalf of CDFIs in the UK is called the Community Development Finance Association. Their new Chief Executive, Ben Hughes, has recently launched a new manifesto – JUST Finance – to grow both supply of and demand for community finance, so all communities have the access to high quality, affordable financial services able to drive wealth creation across the UK. And to celebrate the achievements of the sector the CDFA ran an Innovation Awards scheme and have just announced the winners.
I’ve been privileged to work with CDFA on JUST Finance and the Innovation Awards. You can view 2 of the films I made of their Award winners below – and visit their site to find out more about CDFA and their manifesto.
Watch a short film about the Isle of Wight Lottery scheme, winners of CDFA Innovation in Reaching New Markets Award:
Watch a short film about an ‘Avoid the Loansharks’ roadshow undertaken by Lancashire Community Finance, winners of CDFA Innovation in Community Outreach Award:
You can view 4 more films which I made for CDFA to profile their Innovation Award winners via the links on this page.
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