Media report – Workshop on Future Funding for Business Lending CDFIs
The Centre for Research into Ethnic Minority Entrepreneurship (CREME) hosted a workshop on the 6 March at the Joint Universities Centre at Faraday Wharf in Aston to mark the publication of the final report from a two year research and engagement exercise on funding for business lending Community Development Financial Institutions (CDFIs).
The work was undertaken by two honorary members of CREME Professor Richard Roberts and Dr Steve Walker, both with long careers in the UK SME finance industry. The workshop was attended by about 30 national practitioners in the CDFI market and a number of key policy makers from trade associations and government. Professor Monder Ram, Director of CREME and a non-executive director of a Birmingham based CDFI, chaired the event.
Business lending CDFIs support small firms that have been unable to obtain commercial funding even though they have a viable business plan. As a result, this lending makes a valuable contribution to economic activity, often most evidently within under-served communities, particularly ethnic minorities. The report summarises the findings of a series of seminars and industry based discussions that started off in December 2015 with a supper evening in Muirhead Tower as part of the work of the Entrepreneurship Cluster in the Business School. The conclusions now published review recent trends in activity in the sector with both a sharp rise in lending in between 2012-2015 being followed by a decline in lending in more recent years (despite evidence of strong demand that may well be on the increase).
The authors highlighted evidence of the economic value of activity by CDFIs, despite acknowledging that many of the firms supported report a higher than normal default rate. However, concern was expressed that unless a longer term capital funding environment is established for the business focussed CDFI sector, lending will continue to decline. Too much reliance has been made on a grant and one off funding intervention programme in the past which has reached a hiatus, leading to current problems.
Some good news was presented regarding a few recent developments, including some regarding a microenterprise facility as part of the Midlands Engine Investment Fund, but the authors concluded that more needs to be done to secure the future of the sector. The policy proposal outlined by the report to address the problem was greater use of public guarantees to encourage more private capital to be invested in the sector. This would the authors believe increase capital funding streams but at limited cost to the hard pressed public exchequer. International examples of successful deployment of such arrangements were discussed, notably in the USA.
Following the presentation of the key results Dr Walker and Professor Ram led a wide ranging discussion from the invited audience. Some attendees were able to add evidence to the conclusions based on their own work, notably in Europe, as well as offer a range of practical observations for policy implementation. Overall, most attendees supported the key conclusions of the report and the viability of the policy guarantee approach.
As well as the full report the discussion points have been summarised for wider distribution. While the event marked the formal end of the project, follow up work is planned to disseminate the conclusions, notably at the national conference of the industry’s trade body Responsible Finance in Glasgow later this month where Dr Walker is joint chair of a best practice workshop.
Both Richard Roberts and Steve Walker would like to thank all those who have supported this project over the last two years as well as the attendees at the event for the contributions made. As well as Professor Ram, this included Professor Andy Mullienux from the Lloyds Bank Centre for Responsible Business also in the Business School.
Find out more
Read the full report of the workshop (PDF - 900KB)
View presentation slides (PDF - 583KB)
View the summary of discussion points (PDF - 274KB)