Lloyds becomes first high street bank to invest in community lenders after backing £62m fund
Lloyds Bank has become the first high street lender to invest in the community focused lending sector after backing a new £62m fund.
The fund, launched alongside Big Society Capital, forms the second phase of the Community Investment Enterprise Fund and aims to invest in around 800 small businesses.
It will initially invest in three Community Development Finance Institutions (CDFIs) – BCRS Business Loans, Business Enterprise Fund and Finance for Enterprise.
CDFIs are non-profit lenders based in local communities that make personal loans at low interest rates to households and businesses which struggle to access credit elsewhere.
According to data from industry body Responsible Finance, CDFIs lent £248m to start-ups and small businesses in 2022, up 20 per cent on the year before. Nearly all CDFI borrowers had been declined credit by mainstream lenders.
“Small and medium size enterprises are the heartbeat of the UK economy and as the largest domestic banking group, we have a proud history of supporting UK businesses to thrive,” Elyn Corfield, chief executive of business and commercial banking at Lloyds Bank, said.
“We’re therefore delighted to support the CDFI sector to back local businesses, with a focus on deprived areas, and ensure they have access to a range of financial options right for them,” Corfield continued.
Community lenders play a much bigger role in the US than the UK, where big banks are required to invest in local communities under the Community Reinvestment Act. In 2019, the US community lending sector lent more than $150bn, according to Big Society Capital.
Kieron Boyle, chief executive, Impact Investing Institute said: “Historically, one of the main challenges has been the lack of investment at scale into CDFIs so that they are able to support more small enterprises across the UK.
“It is great to see Lloyds become the first commercial bank to show long-term commitment to the sector and invest in CIEF,” Boyle continued.
In January last year, Natwest backed £900,000 for CDFIs as part of its wider cost of living support package.