Programme to increase availability of funding to social impact sector lenders

The British Business Bank has launched the Community ENABLE Funding (CEF) programme, which is designed to increase the availability of funding to social impact sector lenders, and the smaller businesses they serve in local communities across the UK’s nations and regions. 

The initiative is aimed primarily at Community Development Financial Institutions (CDFIs), and 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.

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 per cent 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 per cent of loans from the sector went to ethnic minority-led businesses, which make up just 6 per cent of UK smaller businesses.

Similarly, 41 per cent of the sector’s smaller business lending went to female-led businesses, which make up around 17 per cent of UK smaller businesses. 

In total, the social impact sector lent £102m to 4,546 smaller business across the UK in 2023.

There is a strong regional focus, with 98 per cent of businesses supported being based outside of London.

Ninety-nine per cent of the lending the social impact sector provides is to smaller businesses which have been declined by a mainstream lender, with 60 per cent of businesses supported based in the UK’s 35 per cent most disadvantaged areas.

Louis Taylor (pictured), CEO, British Business Bank said: “This is an important moment for the social impact lending market and one we’re excited about at the Bank.

“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.”

Gareth Thomas MP, Parliamentary Under-Secretary of State at the Department for Business and Trade said: “Access to finance is one of the key barriers to growth for small businesses, and this announcement is a big step towards addressing some of those challenges.

“Community Development Financial Institutions have that crucial local know-how, the ability to reach businesses that have fallen through the net, and this programme will support many firms to thrive and grow.”