Responsible Finance Impact Report 2023

Responsible Finance 2023 Impact Report Graphic

On Wednesday 17th May, Warren Mutch welcomed Responsible Finance to our Boardroom in the London office, as we supported the launch of their Impact Report 2023.

The briefing session featured a high-level overview of the report findings from Responsible Finance’s CEO, Theodora Hadjimichael, followed by an insightful Fireside Chat exploring the state of funding availability in the space. Some of our own CDFI clients, including Salad Money and Fair Finance, and other market participants such as NatWest, joined the discussion.

Community Development Finance Institutions, referred to as CDFIs generally, are not-for-profit enterprises that provide financial services to areas or communities in the UK who struggle to access mainstream products. This report surveyed the membership of Responsible Finance to measure the impact of CDFIs to these communities, but also to understand some of the challenges they face in accessing funding to continue their missions. Find the full report here.

A statement from the Fireside Chat reflected that, “1 in 5 people can’t get a loan that’s affordable right now, over 1 million people are borrowing from loan sharks, 3 million people are using high-cost credit and 1 in 5 small businesses can’t get a loan when they need to grow”.

CDFIs are offering an alternative route for individuals and businesses to get access to loans by providing affordable credit to those who struggle to get it through traditional channels. It was found that businesses led by women and minority ethnic background groups are impacted the most. This is where CDFIs come in and take a purpose driven approach. Collectively, Responsible Finance member CDFIs lent almost £250 million to 100k customers. Theodora, the CEO of Responsible Finance, expressed “that is something we are really proud of, its 20% more than was lent last year”.

CDFIs worked hard last year to help their customers and businesses cope with the cost of living crisis, they did that by lending 30% more to individuals than the previous year. This meant fewer people had to rely on high interest, short term lending that may not best suit their needs.

Theodora stated, “50 CDFIs in our networks were able to lend more and really believe in their customers despite the challenging lending and economic environment, and they turned more NO’s into YES’s”.

An interesting question was asked about how CDFI’s are able to make this happen. A CEO explained,

“I think it goes down to the social mission and who we are trying to help and where the gaps are. How do we give people in business who are more excluded, this access to more opportunity? Taking a more relational approach - on business lending side, the main reason they are declined by banks is because they are seeking a small loan and its not economical to make that loan work for a large institution. They may not have a track record, or they might not have security. As CDFIs they can take a more flexible approach, use some of the government tools that are really important, which underpin this lending…”

Another CEO explained further, that CDFIs will often run at a lower return than most banks would generally feel comfortable lending at, adding that they use open banking to look more deeply at whether someone could afford to take on additional credit. The CEO stated, “I think it’s really important to note that CDFIs don’t exist just to lend money. We are looking at other solutions whether that be debt sign-posting, or whether that be grants and social tariffs that can be available.”

Read the full report here.

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