An introduction to responsible finance

What is responsible finance?

Responsible finance is about ensuring people and communities can access funding in a clear and transparent way.

Responsible finding providers – also known as Community Development Finance Institutions (CDFIs) – are purpose driven financial organisations that aim to bring about economic and social change to the people and places they support.

Between April 2019 and December 2020, responsible finance providers lent a total of £263 million to 6,000 startups, businesses and social enterprises.

What’s the difference between lending from a bank and lending from a CDFI?

CDFIs have a strong link with local communities, and can often be more flexible in their lending because they really understand and cater to the needs of each individual business.

There are three main types of responsible finance providers:

  • Small business lenders
  • Social enterprise lenders
  • Personal lenders

How do CDFIs work with SMEs?

CDFIs often work with SMEs who are frustrated by the traditional bank lending system. They ensure access to finance for those that may not be able to secure sufficient funding from mainstream banks, or have been refused finance. Their social mission is to meet the needs of underserved businesses.

CDFIs don’t rule out specific sectors, or businesses with a poor credit history. They apply human judgment to their lending.

Businesses supported by CDFIs go on to create jobs and create wider social and economic benefits in their communities.

Where can I find information about CDFIs in the North East?

You can search for and apply to responsible finance providers in the region by visiting www.findingfinance.org.uk (Finding Finance is an educational tool provided by Responsible Finance).