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Dec 05 2012

Gareth Thomas MP joins with sector to support development of community finance

Gareth Thomas MP, Chair of the Co-operative Party and MP for Harrow West, has joined with the Community Development Finance Association (CDFA) in supporting the development of community finance. Here he outlines measures the Chancellor should consider in his Autumn Statement.

Ahead of today’s Autumn Statement, I am joining with the CDFA in calling for the Treasury to aid the further development of Community Development Finance Institutions (CDFIs). I saw at first hand the difference they make to communities and the way in which they tackle financial exclusion in a recent trip to the United States. Here in the UK, CDFIs were established when the Labour Party was last in Government and we in the Labour Party are determined to contribute towards their continued success.

Last year the 60 CDFIs around the country made 33,000 loans totalling £200 million which has financed 2,400 business and 350 social ventures creating over 8,500 jobs. CDFIs saved 18,800 people from using high-cost lenders thus avoiding some £7.5 million interest payments. These figures will be bettered this year.

CDFIs are an increasingly important part of an alternative community finance market which is filling gaps where banks and mainstream lenders are not covering. The demand for their loans increased 88% last year and policy makers must do all they can to ensure they are able to meet the demand for their services and go beyond to put high cost lenders out of the market for good.

There is huge potential in community finance and it needs to be supported by this Government – and successive Governments. Whilst today George Osborne is likely to announce more cuts which will further hit businesses and families, his department should consider the measures the CDFA have called for and allow the potential of community finance to become a reality.

As an immediate measure, I believe that the Treasury should amend the Financial Services Bill to include requirements for disclosure by banks on geography and scale of provision of credit, in order to more accurately identify underserved markets and so target CDFI resources.

The CDFA meanwhile have called for the following three measures that they claim would revolutionise the sector:

  • Set up a CDFI fund to establish new CDFIs where there are none, and help existing CDFIs to expand.
  • Create a loan guarantee scheme designed specifically for the CDFI sector that would underwrite losses associated with these higher risk markets, thereby ensuring that more capital is available for lending.
  • Harmonise tax relief schemes, to incentivise private investment into the community finance sector. This would allow the current Community Investment Tax Relief to become comparable with other peer schemes such as Enterprise Investment Scheme.

In coming months the Co-operative Party will be looking to add further weight to the case in Westminster for the best possible operating environment for community finance to be created by Government. I hope Ministers are as committed to a fairer economy as we in the Co-operative Party are.

Source: Gareth Thomas MP

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