A less restrictive tax relief regime is required in order to further develop social investment in the UK, the report says, and it also calls for the introduction of a UK Community Reinvestment Act, such as exists in the US. In the US this requires banks to reinvest in the deprived neighbourhoods in which they do business. Of course, this assumes that banks are doing business in deprived communities — an issue that the New Economics Foundation has campaigned extensively on. One of the key issues — both in the US and UK — has been ‘bank flight’ from the poorest communities.
As regards CDFIs — community development finance institutions which lend in order to to generate social and financial returns — the report notes that as of March 2009 investment in these relatively new community-based financial institutions is running at only just over a quarter of the £200m total the Task Force recommended should be the aim. CDFIs attract Community Interest Tax Relief and theoretically therefore ought to be an attractive investment proposition for both individual and institutional investors. Other recent research covered here has offered a ringing endorsement of the CDFI model. In fact, I understand from colleagues in the CDFI sector that there are huge regional differentials in demand for CDFI loans from amongst conventional businesses and social enterprises.
If any of our CDFI colleagues have further thoughts on this it would be good to hear them. For instance, are social enterprises inherently and uniformly ‘loan averse’? Or is it the case that at the moment some (health and social care enterprises, for example) are able to access ‘free’ money, such as investment from the Dept of Health Social Enterprise Investment Fund, and therefore don’t require debt finance? And if this is the case, is it a good or bad thing? What’s good for the enterprise I can see may not necessarily be good for the CDFI….