Community Development Finance Institutions: A New Financial Instrument for Social, Economic and Physical Renewal

Publication Date: 2002
Published by: UK Social Investment Forum (UKSIF)
Document Type: Paper

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Community Development Finance Institutions help build thriving communities

Community Development Finance Institutions (CDFIs) lend to the deprived areas and underserved markets across the UK. At present they operate in six main ways:

• Community loan funds lending to enterprises from a revolving find
• Micro-finance funds making very small loans to micro-entrepreneurs - usually one-person businesses
• Community development venture capital, which operates like mainstream venture capital, but only lends to organisations with a social mission
• Social banks, these are for-profit financial service providers, which operate as mainstream banks but have strict ethical policies and are dedicated to social or environmental objectives
• Community development credit unions with a strong focus on tackling social exclusion
• Mutual guarantee societies, which are formal associations of small and medium-sized enterprises

• Enables new enterprises to start generating income and employment
• Ensures a cost-effective way of keeping money circulating in the local area
• Helps form a solid base on which to build up a thriving communities