The British Business Bank has launched its Community ENABLE Funding (CEF) programme, designed to increase the availability of funding to social impact sector lenders and the smaller businesses they serve in local communities across the UK.
Aimed primarily at Community Development Financial Institutions (CDFIs), the initiative is expected to provide a significant boost to the sector, supporting up to £150m of lending over the next two years.
CDFIs are small, regional social impact sector lenders that provide debt finance and support to underserved smaller businesses that can find it difficult to access finance from mainstream lenders.
One of the key objectives of the programme is to help develop the sector as a whole so that many more such businesses can access the finance they need.
CDFIs have strong local knowledge of the smaller businesses they support and the communities they reside in. As such, they are well placed to provide the right finance, which can unlock the potential in these communities.
The British Business Bank’s Community ENABLE Funding programme will be rolled out in two phases. In the first phase, the Department for Business and Trade will provide 100% of the programme’s funding via the British Business Bank, which will enable CDFIs to make more finance available to smaller businesses.
In the second phase, the British Business Bank will source additional funding from private sector investors, leveraging the government-backed funding to increase the amount of wholesale finance available under the programme.
CDFIs are known as ‘not-for-profit’ lenders as they do not pay dividends, and their profits are reinvested into their business to increase access to finance for smaller businesses. Their overall goal is to provide fair and affordable finance and create social value for the communities they serve.
The social impact sector is particularly important in serving smaller businesses that are led by underrepresented groups, such as females or people from an ethnic minority group.
In 2023, for example, 24% of loans from the sector went to ethnic minority-led businesses, which make up just 6% of UK smaller businesses.
Similarly, 41% of the sector’s smaller business lending went to female-led businesses, which make up around 17% of UK smaller businesses.
In total, the social impact sector lent £102m to 4,546 smaller businesses across the UK in 2023. There is a strong regional focus, with 98% of businesses supported being based outside of London.
99% of the lending the social impact sector provides is to smaller businesses which have been declined by a mainstream lender, with 60% of businesses supported based in the UK’s 35% most disadvantaged areas.
Louis Taylor, CEO of the British Business Bank, said: “This is an important moment for the social impact lending market, and one we’re excited about.
“The Community ENABLE Funding programme is designed to unlock finance across the UK’s Nations and regions for those small businesses who need it but have struggled to access it historically.
“We hope this can empower local Community Development Finance Institutions (CDFIs) to support the communities they’re a part of and generate the desired growth the country needs.”
