Driving Community Transformation: Unveiling the Role of CDFIs
In the quest for a more inclusive and prosperous society, Community Development Financial Institutions (CDFIs) have re-emerged. This article explores the essence of British-based CDFIs, shedding light on their purpose, operations, and the transformative impact they can have on local communities.
Community Development Financial Institutions (CDFIs) in the UK are specialised financial organisations dedicated to promoting social and economic development in underserved communities. They focus on areas where access to affordable financial services and credit is limited or where more community focused businesses get forgotten. CDFIs provide lending to support small businesses.
The Purpose of CDFIs
The primary purpose of CDFIs is to bridge the gap in financial services and capital availability in underserved areas or sectors. They aim to improve the quality of life, enhance economic opportunities, and empower individuals and communities. CDFIs often prioritise applications that align with social and environmental goals, driving positive change and fostering long-term community resilience.
This can sometimes be as simple as supporting a business creating new jobs via expansion.
How CDFIs Operate
CDFIs acquire funding from diverse sources, including government grants, private investors, foundations, and socially responsible investors. These funds are then deployed through targeted lending programmes.
CDFIs employ a thorough evaluation process that considers both financial viability and the potential social impact of the ventures they support. Think of it as old fashioned banking when we produced a business plan, cash flow, CV and forecasts etc.
Typically CDFIs are geographically focused albeit that doesn’t mean a business in Kent can’t apply through a CDFI in Somerset, don’t let the location stop you accessing these schemes.
Community Development Financial Institutions (CDFIs) act as catalysts for positive change, addressing economic disparities and fostering sustainable development within their communities. By providing financial services, capital, and support to local initiatives, CDFIs contribute to building a more equitable and resilient society, empowering individuals, and promoting community well-being.
Sounds good doesn’t it?
If you are a small business then don’t rule out using a CDFI as a way to raise finance. Typically you can raise up to £50k via these schemes. Be prepared to fully package your application and put some work in, but for those businesses left behind by the mainstream banks (and that’s quite a few!) the CDFI can be a viable option.
By Dave Farmer