£19m jump in responsible finance lending to financially-excluded individuals, businesses and social enterprises

£19m jump in responsible finance lending to financially-excluded individuals, businesses and social enterprises

The UK’s ethical “responsible finance” sector grew by 8% (£19 million) in 2018, according to new figures published today.

Responsible finance providers helped tens of thousands of financially vulnerable people to avoid borrowing from high-interest lenders.

They also supported thousands of credit-worthy businesses and social enterprises rejected by or unable to access finance from mainstream lenders.

The providers, otherwise known as community development financial institutions, lend to financially excluded individuals and to viable businesses and social enterprises.

New research published today in Responsible Finance: The Industry in 2018 demonstrates:

  • Responsible finance providers lent a total of £254 million to 52,121 customers in 2018, an 8% increase on the £235m lent in 2017.
  • The providers lent £85 million to 5,310 businesses, creating 4,490 new businesses and creating or saving 10,370 jobs. This was a 27% increase on the £67m lent to UK businesses in 2017.
  • £138 million was lent to 475 social enterprises – 112 more social enterprises than in 2017 – creating and saving 4,060 further jobs.
  • £26 million was lent in 45,900 loans to individuals (£4m more than in 2017). 23,230 of those taking out loans from a responsible finance personal lender had previously borrowed from a high cost lender.
  • £5 million was lent to 430 homeowners, bringing homes up to a decent standard and enabling 220 customers to stay in their own homes.

Alongside the lending figures, the research includes postcode mapping showing how responsible finance loans are made in areas with low bank lending and high levels of deprivation.

It also demonstrates how responsible finance providers contribute directly towards reaching the UN Sustainable Development Goals.

Jennifer Tankard, Chief Executive of Responsible Finance, said,

“Access to finance and financial exclusion continue to be significant barriers to growth and long-term prosperity in local economies across the UK, at the individual, household, and business levels. Responsible finance providers play an essential role in ensuring people can access useful and affordable financial services.

“For low income consumers, who are often faced with a ‘poverty premium’ for goods and services, responsible finance providers offer substantial cost savings compared with high-cost credit providers.

“And responsible finance providers are a critical source of finance helping social enterprises, businesses and micro enterprises contribute to employment and job creation, including in some of the most deprived parts of the UK.

“They have a real and unique impact on people’s lives with business ambitions achieved, jobs created and saved, social challenges tackled, the building of financial resilience and people able to stay in their own, safer, homes.

“Although this year has seen continued growth, demand continues to outstrip supply.

“Access to finance is access to opportunity. Given the transformative impact our members make within some of the UK’s poorest communities, further investment from a range of different sources is essential, alongside other actions to continue to meet the increasing need for affordable and ethical finance.”

The full report, available here, includes comprehensive data on loan characteristics and disbursals alongside a series of recommendations to enable the sector to continue to meet the needs of under-served customers and tackle inequality in the UK.

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