ENTERPRISING COMMUNITIES : WEALTH BEYOND WELFARE
< prev contents next >

APPENDIX A

Community Development Finance Sectors - Comparing the USA and the UK
US SYSTEM - KEY ELEMENTS   UK SYSTEM

NATIONAL GOVERNMENT

  • Community Reinvestment Act - banks are required to serve poor neighbourhoods while still making prudent lending decisions; information must be disclosed and banks are rated on performance; ratings are taken into account in regulators' decisions on M&A.;
  

No direct UK equivalent, but the Bank of England now monitors bank lending in under-invested communities.

  • CDFI Fund - matched funding in form of debt, equity and grants. Bank Enterprise Awards - rewards banks for improvements in reaching low income neighbourhoods.
 

Phoenix Fund - started in 1999 at the DTI. So far on a smaller scale although trebled in size in 2000. No scheme at present to reward banks for innovation in under-invested communities.

  • Tax credits - for low income housing and planned for community development finance.
 

No UK equivalent, although a significant and active market exists in private finance for social housing.

  • Small Business Administration - guarantee programmes - for small businesses in general and for micro loans.
  

Small Firms Loan Guarantee Scheme - not specially aimed at under-invested communities.

CHARITABLE FOUNDATIONS

  • A wide range of charitable foundations and a strong tradition of personal philanthropy and corporate giving. Major foundations such as Ford, Rockefeller and McArthur have played a leading role in community development finance through grants and programme-related investment.
 

Fewer large-scale foundations in the UK. Some, such as Esmee Fairbairn, have started to support community development finance. The Joseph Rowntree Foundation has funded research on the sector and has played a lead role in promoting investment in social housing.

RESEARCH/CAPACITY BUILDING

  • Many players: e.g. Woodstock Institute, Aspen Institute, Corporation for Enterprise Development.
 

Few players: e.g. New Economics Foundation, Community Finance Solutions.

POLICY ADVOCATES/COALITIONS

  • The Coalition of Community Development Financial Institutions, Corporation for Enterprise Development, the Microenterprise Coalition.
 

UK Social Investment Forum currently plays this role to some degree. The new CDFI association may become the lead advocate in future.

INTERMEDIARIES
  • Associations (eg. National Community Capital Association (NCCA), Association for Enterprise Opportunity (AEO), National Federation of Community Development Credit Unions, Community Development Venture Capital Alliance (CDVCA))
  • Wholesalers and support organisations (eg. Local Initiatives Support Corporation (LISC), Housing Reinvestment Corporation, Community Preservation Corporation, Neighbourhood Housing Services)
  

UK intermediaries include the Housing Finance Corporation (HFC) and the Association of British Credit Unions Ltd (ABCUL). A CDFI trade association, the Rebuilding Society Network, is currently being started.

CDFIs [29]

  • Community Development Banks
    25 exist with assets of about £2 billion. Fully licensed, for-profit commercial banks with a community development mission.
 

Do not exist. UK has social banks but these do not have a primary focus on under-invested communities. As Community Loan Funds reach a sufficient scale, many are likely to seek the benefits of banking status.

  • Community Loan Funds
    600 exist. Most focus on asset-based community development and housing loans or small business lending in low income neighbourhoods.
 

Many initiated by local authorities have failed or fallen into disuse. Other independent initiatives such as Aston Reinvestment Trust and Industrial Common Ownership Finance (ICOF) are succeeding and have potential to grow. Housing Associations are taking an increasing interest in community development finance.

  • Micro-loan Funds
    At least 341 microenterprise programmes and 283 microenterprise agencies (lending and/or Technical Assistance).
     
    The total capitalisation of Community Loan and Micro Loan Funds is £1.195 billion.
 

The Prince's Trust has reached national scale but has strict age-restrictions. The recently launched Street UK aims to reach national scale. Small but growing number of other programmes exist.

  • Community Development Venture Capital Funds
    Approximately 45 exist, with assets of about £207 million. Sector growing as supply of loans to low income neighbourhoods has increased and now there is a need for patient equity.
 

A number of equity gap funds have emerged at regional and national level eg. the GLE - Baring English Growth Fund. An estimated £45 million is targeted at under-invested communities. [31]

  • Community Development Credit Unions [30]
    Very large credit union movement, covering much of the population nationwide. 170 credit unions are focused specifically on community development.
  

Overall credit union movement still small but growing - total assets £240 million. A few emerging community development credit unions, such as in Birmingham. Few credit unions offer enterprise lending.

 

FOOTNOTES:
29. US data - Numbers of institutions from Woodstock Institute data, 2000. Assets (except CDVC Funds) from "1999 Report on Socially Responsible Investing Trends in the United States", Social Investment Forum, November 1999. CDVC Fund assets from research by Julia Sass Rubin of Harvard University for Community Development Venture Capital Alliance (forthcoming).
30. Credit Unions are not addressed further in this report due to other credit union policy initiatives in progress.
31. New Economics Foundation estimate, 2000.

 
< prev contents next >

reports  |  members  |  research  |  other info
updates  |  press  |  home  |  page top

© 2000 - 2006 Social Investment Task Force, members, research & evidence providers.
All rights reserved.
content: enterprising-communities@cdfa.org.uk
technical: webmaster@enterprising-communities.org.uk
design by wwwolf ltd