THE BLOG

Redundancies Make Headlines - Missed Opportunities Should Too

09/03/2016 10:32 GMT | Updated 09/03/2017 10:12 GMT

Whenever a well-known business announces redundancies of hundreds of jobs it makes the headlines. We all understand the horrifying impact these kinds of decisions have on people and communities. So imagine where the UK's recovery would be without the 100,000 jobs that exist thanks to responsible finance lenders over the past 10 years.

These jobs have been created or even saved thanks to the affordable, ethical and locally focused lenders that make up the Responsible Finance industry, according to our new report, 10 Years of Responsible Finance, published today.

And these lenders could make £6 billion available to 1.4 million businesses and people in the next 10 years, unlocking over £2 billion in finance for new and growing businesses and generating at least £16 billion in GDP.

But this promising future is uncertain. Although the rehabilitation of the banking sector continues, there's still an imbalance between the supply of appropriate finance from mainstream providers and demand from society at large.

Britain's 5.4 million small businesses continue to face challenges in accessing the finance they need to grow and create jobs. In particular, businesses of less than 50 employees are still struggling to borrow according to the recent Small Business Finance Markets Report published by the British Business Bank.

Meanwhile despite many strides forward social enterprises are frequently misunderstood by financial service providers. They cite access to finance as their biggest barrier to starting up and becoming sustainable.

And 6 million adults (10% of the UK's population) either don't have access to a bank account or are on the edge of mainstream banking, putting them at risk of problem debt from the high cost short term credit sector.

Filling this gap is what responsible finance providers specialise in. Responsible finance providers are a dynamic network of organisations that tailor their services locally to the needs of those often excluded, giving access to fair, affordable finance to people and businesses. Their finance creates jobs, boosts enterprise and fuels growth.

Over the past 10 years, responsible finance has grown from lending just £77m to £250m per year and has lent a total of £1.6bn to 280,000 people, businesses and social enterprises.

It's financed 50,000 businesses and over 4000 charities and social enterprises that couldn't access finance from banks. And providers have created 68,000 jobs and saved a further 41,000 that were at risk.

But as we celebrate 10 years of responsible finance with the publication this week of our new report, 10 years of Responsible Finance, detailing the many achievements of affordable, ethical finance providers, we must acknowledge that we could do much, much more to support the UK's economy.

The responsible finance industry is well positioned to continue growing. Building from the impressive foundations and growth rate of the last 10 years, responsible finance providers could lend £6 billion to 1.4 million businesses and people in the next 10. This would unlock over £2 billion in finance for new and growing businesses, generating at least £16 billion in GDP.

This would also mean that more than 1 million more people would have access to affordable credit and the advice and services that will help relieve debt levels and gain financial management and literacy skills.

But this promising future is uncertain as challenges remain with matching demand for finance with supply. Responsible finance providers need access to stable sources of capital to scale, and currently the future of those funds is uncertain.

To make the progress needed for the responsible finance sector to continue playing a critical role in fuelling the economy and productivity, we are making three clear recommendations this week - to government, to local authorities and local enterprise partnerships, and to our own responsible finance providers:

1. Access to capital. Responsible finance providers need access to stable sources of capital to continue growing their lending. Innovative policy guarantee schemes can be instrumental in leveraging in new private investment. Existing schemes such as the enterprise finance Guarantee and similar european guarantees and the industry tax relief (community investment tax relief) should be revised so that they are fit for purpose for the responsible finance industry. improving these policy tools would be catalytic in stimulating new investment into the sector to on-lend.

2. Local integration. The "devolution revolution" is an exciting opportunity for local governments across the country to take control of their localities. Every local authority and lep should be working closely with their responsible finance provider as the delivery mechanism for reaching underserved populations of people, businesses, and social enterprises, thus creating inclusive local economies.

3. Harness new technology. New "fintech" is changing how people and businesses access, use, and manage their finances. To broaden its reach and improve efficiency, the responsible finance sector must use new tech such as common operating systems, investor platforms, and standardised social impact reporting. exciting tech initiatives are already underway which are transforming how ethical finance is delivered.

The UK's business community say responsible finance is vital.

Emma Jones MBE, the founder and chief executive of Enterprise Nation, says "Responsible finance providers have clearly been an essential source of finance for businesses over the last 10 years. Businesses need access to affordable finance from providers who understand them."

And Mike Cherry of the Federation of Small Businesses adds, "Access to finance can be a real challenge for small firms. Responsible finance providers are able to take the time to understand the needs of a small business and provide fair and affordable finance to those with ambitions to grow."

For an inclusive and productive economy, we need a diverse financial services sector. Responsible finance offers a personal and customer-focused service that wants its customers to thrive and contribute to strong local economies.