There is a common saying that the efforts of social enterprises are hampered by access to funding. Now, there is a new saying that Community Development Finance Institutions (CDFIs) are a solution to funding for social enterprises.
Existing primarily in the US and UK, CDFIs are financial institutions that invest in markets underserved by mainstream financial institutions. They are run by the local community and provide affordable credit to businesses, social enterprises, and households. Based on this description, they shared similarities with microfinance institutions. Between April 2010 and March 2011, CDFIs in the UK have distributed £23 million worth of loans to micro-enterprises and small and medium enterprises.
But there remains a problem. Many CDFIs are struggling to access the capital and revenue they need to lend. Many communities in the UK do not have access to community finance.
In order to address the gap between the demand for finance and credit availability for small businesses, social enterprises, and individuals, the Community Development Finance Association (CDFA) is launching a program called JUST Finance that includes the launch of a bank-to-CDFI referral system, setting up a CDFI fund, and integrating community finance into the larger financial services system. The program is made possible by The LankellyChase Foundation.
This will prove to be a critical stimulus for the economic and social recovery of the UK and additional support for social enterprises that struggle with funding.
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