Credit with a social mission

Community Development Finance Institutions (CDFIs) in the UK share a common goal: to serve the finance needs of individuals and existing or aspiring entrepreneurs who cannot access credit from the mainstream sector. CDFIs are struggling as continued political and financial support as well as capacity in the sector is lacking. This is a particular threat to the microlending market segment which is already contracting with average loan sizes increasing.

Despite being equivalent to microfinance in a European context, the term microfinance is not used for microlending in the UK. This report argues that aligning microlending in the UK with the European microfinance movement, and distinguishing this from other credit lines, is essential to avoid further negative development that could potentially leave 76% of CDFI clients without access to finance.

Microfinance is unlikely to be financially sustainable in the UK and as such Governments and funders need to adjust policy and funding strategies accordingly. The recommendations in this report for the Community Development Finance Association, the Government and CDFIs outline changes that will enable microfinance to fulfil its role as a facilitator of social and financial inclusion in the UK.