Big finance has failed us, let’s give small finance a go

During the last six years we’ve seen quite clearly the impact of big finance on local communities. We’ve learnt what happens when the distance between people and finance gets so large that neither side understands the other any longer. When banks focus their attention on shareholder profits rather than the health of people and places.

Payday lending has risen, small businesses are struggling to access finance, communities across the UK are stuck in a spiral of poverty and inertia.

For all the talk of reform, little has changed in our banking system. So, rather than relying on big finance to get us out of this mess, why don’t we give small, local, community finance a go?

Invest our money locally, build networks of neighbourhood finance, help local spend to circulate in communities rather than be sucked out by payday lenders, big banks and corporate monopolies.

In most developed countries there exist networks of banks and financial institutions committed to people and place. Here in the UK we are running to catch up. Credit unions and community development finance institutions do a great job at bringing finance to a local level, but in many places their service is patchy and fragmented.

People are still falling through the gaps: while community finance provided £0.7bn in loans in 2012, unmet demand for finance for those locked out of mainstream banks is estimated at £6bn.

Things are stirring at the local level however. This month’s edition of New Start reports on the local areas involved in a community finance revolution, joining up the dots of local finance to ensure it serves people and place.

Our interview with Mike Toye, head of the Canadian community economic development network, shows the impact of a grassroots approach to local economic change.

We ask what needs to happen to bring legislation similar to the US Community Reinvestment Act to the UK, to ensure low income areas are no longer ‘redlined’ by the banks, and we feature the work of the Ulster community development finance institution which is filling the gap in funding for local small businesses and social enterprises.

In Ten Ideas for Change we highlight initiatives across the world that are building community finance and a new local economics movement, to ensure that wealth stays within places.

So while our politicians remain inert, unable to see beyond the City of London, let’s move our money and our sights from big finance for the few to small finance for the many.

To read April’s edition of New Start click here.