Social enterprise lenders feel the strain of credit crunch

Social enterprise lenders are at risk of collapse as more people are turning to them after being refused by banks and building societies.

Dr Lindsey Appleyard, of the University of Nottingham's school of geography, will present research today that shows the credit crunch has extended the need for alternative financial lenders beyond locations of geographic and social disadvantage - and this is putting a strain on social lenders.

Speaking in advance of her presentation, Appleyard said: 'As the economic landscape is changing, we see community development finance institutions (CDFIs) no longer as the lenders of last resort, but dynamic organisations which could provide a partial solution to an increasingly significant finance problem, if only they receive the appropriate investment.'

Appleyard's research, which she will introduce at the annual international conference of the Royal Geographical Society in Manchester, shows the CDFI network reporting 15.3 per cent growth in investment and loan portfolios in 2008.

Appleyard will call on government and private sector support to meet the rising demand.

Her research warns that the 'UK's network of CDFIs risks collapse unless ministers set out a clear strategy on financial exclusion, showing how the government will support these institutions to meet demand'.

Community Development Finance Association CEO Bernie Morgan called the research 'extremely timely'.

'The government's efforts to free up capital from mainstream banks is having only partial success,' she said.

'If the government is serious about delivering real help now to communities it should allocate more resources to CDFIs who will very quickly deliver finance where it is needed.'

One CDFI already struggling to keep up with demand is the Aston Reinvestment Trust (ART).

ART CEO Steve Walker said: 'Demand for our services tripled in the six months leading up to March this year and we'll soon have to be more selective.

'The vital question for the UK economy right now is if the banks aren't lending to small and even medium sized businesses and CDFIs lack the resources to step in, as our experience shows, who is going to fill the gap?'