Alternative lenders move to close funding gap for credit-starved borrowers

There’s a finance gap opening up among people and small businesses that are being turned down for loans at banks and building societies.

The danger is that then fall into the clutches of unscrupulous high-cost credit providers. But a network of alternative lenders across the country hopes to change that.

Community Development Finance Institutions are non-profit organisations that lend to individuals, businesses, social enterprises and charities which can use the money to help develop their local community.

They lend to people who find it difficult to borrow money from mainstream lenders, with lower rates than doorstep lenders or loan sharks.

Now they’ve grouped together to launch a new campaign to ensure that everyone across the country is able to borrow money at an affordable rate.

That’s the vision set out in a new report being published on Friday by the Community Development Finance Association.

Ben Hughes, chief executive of the CDFA said: “We must not under-estimate the importance of providing access to finance for all, nor under-estimate the investment that is needed to achieve this.”

The report calls for banks to work with community lenders and pass on declined customers. It also calls for infrastructure to link-up community lending, saving and support, plus the government should set up a £150m capital fund to expand the network.

“The Government must introduce community investment legislation, to ensure all families and entrepreneurs get the finance they deserve,” Mr Hughes said.