Published: 26th Sep 2016

9. Finance that serves people, place and a productive economy:

Finance and banking have become divorced from needs – both locally and nationally. Small businesses struggle to get loans, and local organisations and social enterprises are unable to access finance. Social investment funds are often inappropriate for those working at ground level in their local communities. During our visits to the ten cities, social organisations called for a level playing field with the private sector in terms of access to local funding streams, and in their partnerships with the local public sector. For while private sector projects enjoy access to capital at beneficial rates and partnerships in the long term, social organisations are often funded for shorter periods, leading to projects that are more precarious and insecure, and preventing experimentation. The network of community development finance institutions that exist across the country – from Aston Reinvestment Trust in the west Midlands to Robert Owen community banking in Wales – offer business and home loans and, in the case of Robert Owen, a fund for local community energy projects. A number of local philanthropic organisations are focusing their efforts on building local funds for investment, such as the Leeds Fund – run by the Leeds Community Foundation – which hopes to spread the city’s wealth more evenly, and the Stockport Fund, managed by Forever Manchester. Innovations such as community shares, crowd-funding and peer-to-peer lending are opening up new sources of finance to meet local need and help experimental projects and new enterprises get off the ground. Finance needs to become democratic and resilient again, able to serve the needs of people and place and to be the cornerstone of a productive economy.

Who’s doing it:

Robert Owen Community Banking | Airedrie Savings Bank | Leeds Fund | The Stockport Fund | Community shares | Crowd-funding

What it needs:

‘True’ venture capital available needs to be available to social organisations to enable them to innovate and develop. In general, local investment funds that can serve the small-scale end of local economic development are crucial. A more diverse stakeholder banking sector including mutual, credit unions, co-ops and CDFIs could enable a greater availability of local loans to productive businesses, as well as providing better access to customers within more deprived communities. Larger banks need to refocus on these core offers to local and regional economies as well.

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