Invisible community finance sector risks extinction, warn experts

Experts from the UK and Europe warn that the community finance sector's low profile means that it might disappear in a few years' time.

Naomi Kingsley, outgoing chair of the Community Development Finance Association (CDFA), told social bankers at their conference last week in Newcastle-upon-Tyne that she was worried about the sector's visibility.

‘Whenever I think of our lack of visibility I feel quite terrified and get angry at us. Getting visibility might be the most important thing we do,' she said.

Her comments were endorsed by Philippe Guichandut, executive director of the European Microfinance Network.

He said: ‘If we don't take the opportunity now the sector will disappear in a few years. There are a few issues in Europe and one is visibility. There is value in being seen, but when we did research into how microfinance is seen we found that it is almost invisible.'

Both Kingsley and Guichandut highlighted the need for innovation when it came to the products community development finance institutions (CDFIs) offered. Kingsley pointed to the fact some CDFIs where already working with local authorities to finance home improvements, while in Europe microfinance institutions were moving into the area of affordable insurance.

Kingsley threw her support behind the idea of a US-style community reinvestment act (CRA) which compels banks to invest in deprived areas and encourages them to invest in CDFIs

Mark Pinsky, CEO of the Opportunity Finance Network, the CDFA's US sister organisation, said the CRA had leveraged roughly half a trillion dollars in financing to low income communities. However, the CRA had also been made a ‘whipping boy' by banks, blamed for the problems of the economic crisis, thanks to a concerted PR campaign and despite positive proof to the contrary.

Pinsky said the US was lucky to have a president who used to be a CDFI lawyer and therefore understood the sector. He said he anticipated the president would invest more money in the sector - possibly as early as this week.

Pinsky added the low income market was the fastest growing market in the US. With an injection of finance CDFIs hoped to enter the gap in the mortgage market created by the collapse of sub-prime lending and stop the ‘predators from coming back in'.

He said: ‘If we can get access to liquidity - and right now we're dying for it - we can play a much bigger role even two or three years from now than we could have ever imagined. These are remarkable times.'