Community finance has had a significant impact on some of the most disadvantaged communities, leveraging in millions of pounds of investment.
The community finance sector – including credit unions, community development finance institutions (CDFIs), social enterprise finance funds, and community development venture capital funds (CDVC) – has a key role to play to revitalise local communities in partnership with other entities, such as financial institutions, housing associations, development trust associations, local authorities and Regional Development Agencies (RDAs).
Community finance organisations are key components of the network of institutions that, if designed well and with supportive policies, can work together to form an effective social investment market. Increasingly private finance is seeking opportunities to invest in enterprises or projects with social objectives to redress economic exclusion and poverty or support community regeneration.
This social investment marketplace has potential to channel substantial funds to social and community enterprises. It requires a supportive policy environment that recognises the value of long-term funding for third sector organisations and puts in place the requisite tax and legislative mechanisms to build and sustain social investment institutions. Currently this architecture is half-built.
The recommendations of the Social Investment Task Force (SITF) in 2000 were successful to put in place the basic foundations for a social investment marketplace. SITF brought about a gradual shift in thinking and awareness of the role of private finance to achieve social outcomes and positive change for underinvested communities. But while some of the initial SITF recommendations have been fully adopted, there is still a long way to go.
Following the original SITF recommendations, we have identified five clear steps required to complete the infrastructure for a thriving social investment market in the UK.
This report finds that the architecture for a social investment market that will channel finance to community development is incomplete.
The main aim of this report is to encourage policy-makers to address shortcomings in policies to support social investment for community development. Appropriate and enabling legislation, financial and tax mechanisms are required to support a thriving community finance sector. It is disgraceful to abandon a half-built house.
Further steps are required to build a strong community finance sector that is part of a thriving social investment marketplace, where private financial flows can be channelled to well-managed social and community enterprises that create real and lasting change for disadvantaged neighbourhoods.
We address three key issues facing community finance and the social investment marketplace:
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