Written evidence from Fair Finance Consortium
Limited
INTRODUCTION
Fair Finance Consortium Limited is a not-for-profit
organisation owned by eight CDFIs across the West Midlands and
currently financed by its members and its regional development
agency, Advantage West Midlands. It exists to deliver top level
marketing activities on behalf of CDFIs in the West Midlands,
share best practice and to centralise some of the CDFI activities
(such as performance reporting) where such centralisation makes
the overall sector more efficient and effective. FFCL members
include both personal and enterprise lenders and in the 12 months
to July 2010, the members lent £4.6 million (250+ loans)
to micro and small businesses and SMEs, all of whom had been unable
to raise funds from their bank. The oldest member organisation
has been operating for some 20 years, although most are in the
five to 10 year band. Most of the FFCL members are also members
of the CDFA, the national body representing community finance
providers. Consortium members can lend up to £50k to viable
businesses, with some members being able to lend as little as
£1k in appropriate circumstances.
COMMENTS
Fair Finance Consortium wishes to make the following
four points.
1. CDFIs in the West Midlands have built up a
robust working relationship with their RDA (Advantage West Midlands)
since the latter's creation. This has enabled the CDFI sector
to fill some of the vacuum left by the banks as they have reduced
their lending to the small business market. CDFIs initially provided
finance to those businesses that were financially excluded even
before 2008 (when many more became financially excluded) so the
support and working relationship with AWM has enabled the "upper
limit" of the CDFI market to rise and some CDFIs are now
lending to businesses that would have been typical bank customers
a few years ago.
It is the view of the Fair Finance Consortium
that LEPs should be accountable for the provision of financial
support (directly or indirectly) across the whole spectrum of
enterprise related projects, with the possible exception of mega-projects
that are beyond the scope of this document. The obvious way to
deliver finance to small businesses is for there to be relationship
between LEPs and CDFIs such that CDFIs continue to be both publicly
and privately funded. Fair Finance Consortium would expect LEPs
to play a lead role in managing European funding contracts such
as ERDF, where available. The view has been expressed elsewhere
that LEPs should be accountable only for the glamorous, high growth,
probably high tech businesses, but this ignores the routine "me
too" businesses that provide role models and employment in
some of the most blighted neighbourhoods. If LEPs do not support
businesses in such areas then the message sent to their residents
(and the consequences) could be significant.
2. LEPs' USP is that they are local and the CDFI
model has proved that local delivery of business support and finance
can be made to work successfully. Local cannot be too local if
viability is to be maintained. Typical CDFI examples are Aston
Reinvestment Trust, which covers Birmingham and Solihull and Black
Country Reinvestment Society, which covers the Black Country and
Staffordshire. We believe that the ideal situation would be for
a LEP to have a relationship with no more than two to three CDFIs
(recognising that most providers operate within specified loan
sizes, ie sub £10k, £10k to £50k, etc).
Fair Finance Consortium believes that there
is a natural synergy between a local enterprise finance provider
and a LEP. The two are, quite simply, natural partners, particularly
where the CDFI has been operating in the area for a number of
years.
3. Nine English RDAs produced glaring inconsistencies
between neighbours. AWM's multi provider approach has produced
a vibrant competitive CDFI sector where a number of CDFIs can
lend up to £50k, while others can lend small amounts to start-up
and micro businesses. The EMDA strategy was to support one lender
for the whole East Midlands, with a maximum loan of £20k,
a minimum 30% customer contribution and no competition. The result
has been that the CDFI sector in the West Midlands has evolved
as the financial needs of the small business sector have evolved
almost beyond recognition over the last two to three years. This
is evidenced firstly by West Midlands CDFIs lending to enterprises
formerly in receipt of bank finance and secondly by the annual
CDFI lending in the two regions (factual £5 million in the
West Midlands, anecdotal £1 million in the East Midlands).
Fair Finance Consortium believes that LEPs must
aim to deliver consistent services in both volume and quality
across the country. Logically there must be instances where near-neighbours
fall under the jurisdiction of different RDAs, but such events
will become much more common with perhaps 30-40 LEPs rather than
nine RDAs. It is clearly unfair if a post code lottery means that
services available to one customer are unavailable to someone
in the next street and the opportunities for "shock horror"
media coverage are immense. It is therefore suggested that a "LEP
Charter" should be created, outlining minimum standards that
any LEP should reach, covering such items as business starts and
jobs created, as well as more strategic measures. The charter
would be the basis for establishing the performance of a LEP.
4. Fair Finance Consortium fully appreciates
that funding for LEPs cannot be at the level enjoyed by the RDAs
and that LEPs should not be "next level down" RDAs.
However, individual LEPs need to have access to adequate funding
to deliver their agreed remits and need to be competently managed
by people who understand both the public and private sectors.
We believe that failure to recognise these two key issues could
marginalise LEPs in their own areas resulting in their lacking
influence and leading to localised economic under-performance.
Lastly, the effective linking of a national business support service
to the LEP services may be challenging.
11 August 2010
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