Community development finance: a form of social investment
- Publisher: Northumbria University
This thesis aims to critically examine the development of Community Development Finance Institutions (CDFIs) in the UK: organisations that lend to businesses unable to access finance from mainstream sources. The overall aim of the research is to capture the development of a proto-type sector into a recognisable and fully-fledged financial sector. The research found there was considerable interest in CDFIs in the late 1990s fuelled by research reports published by the New Economics Foundation. Ideas and influences were being transferred to the UK from North American CDFIs and from micro-finance lenders in the developing world. While a few CDFIs had existed in the UK since the 1970s, from the late 1990s a new generation of organisations were being established to help combat what New Labour had defined as financial exclusion. The thesis identifies this group of CDFIs the ‘British New Wave’, because they were developing their own products and services to meet local needs. After 1997, New Labour ideas about a potential Third Way and Communitarianism were increasingly influential. This thesis argues that the subsequent development of CDFIs can be strongly interpreted as offering a Third Way between the market and the state. Their links with local communities or sectors (such as social enterprise) also enhanced their importance at district, regional and national levels. The research also analyses a number of individual case studies such as the Aston Reinvestment Trust and Street UK, the CDFI sector and government policy to highlight the complexity of the challenges facing CFDIs particularly the range of issues relating to funding. The thesis argues that the government’s initial interest in the sector has waned over time and some of New Labour policies aimed at promoting localism have in practice restricted the growth of CDFIs. At the end of the first decade of the twenty first century, the UK CDFI sector is surviving and offering loans to businesses excluded from finance and offering social and economic benefits that should be recognised and supported through social investment. However, despite the optimistic note in some areas of the thesis, it will be argued many CDFIs remain financially unsustainable precisely because they offer small business loans and work with their borrowers.
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