UK CDFIs – From Surviving to Thriving: Realising the Potential of Community Development Finance

This report examines the extent to which the U.K. Cooperative Development Financial Institution (CDFI) movement is fulfilling its original purpose of providing affordable finance to disadvantaged communities. It analyzes the experiences of four CDFIs in the context of various demands they faced from policy-makers and funders. Study findings indicate that CDFIs are:

• Lacking political support and are inefficient in the U.K.;
• Feeling constrained in terms of profitability and sustainability because of their role as social enterprises;
• Diverging from their mission, as lack of funding has pushed them to generate profits at the expense of outreach;
• Becoming dependent on income generated from interest rates and private sector investment;
• Building a reputation, but do not yet have a track record sufficient to instill investor confidence.

The banking sector was envisaged as a natural ally of CDFIs in terms of funding, investment and referrals, but strong partnerships are yet to emerge as a norm for the sector. Banks need legislation and incentives that compel them to co-operate with CDFIs. The report concludes with a set of practical recommendations to enable CDFIs to achieve a change in effectiveness and impact.