£62 million boost to help CDFIs support small businesses

04 Mar 2024

  • Rest of the UK
  • Investment

Increased investment in the CDFI sector in the second phase of the Community Investment Enterprise Fund (CIEF). The fund aims to meet growing demand as half of the businesses accessing the fund will be in the most deprived areas of England and Wales.

A £62 million investment fund has been launched to help small businesses across England and Wales access finance to support local jobs and economic activity. The Community Investment Enterprise Fund (CIEF) aims to invest in around 800 small businesses, supporting around 10,500 jobs.

CIEF Logo Small (1)

The Fund will initially invest into three Community Development Finance Institutions (CDFIs) - BCRS Business Loans, Business Enterprise Fund and Finance For Enterprise. CDFIs are socially motivated lenders which already lend around £100 million every year to creditworthy businesses which traditional and challenger banks, and fintechs cannot serve. They lend disproportionately more to businesses led by women, ethnic minority entrepreneurs and almost 50% of CDFI lending is to areas in the UK’s most deprived regions¹.

Funded by Lloyds Bank, Big Society Capital (BSC) and with contributions from the participating CDFIs, CIEF will provide the CDFIs with the capital they need to meet growing demand from small businesses.

The fund, which follows on from a successful first phase of funding, will continue to be managed by Social Investment Scotland (SIS), which has been investing in the social sector since 2001 and is itself a CDFI. Responsible Finance and the Impact Investing Institute have both played a key role in bringing this second phase to fruition² along with the three participating CDFIs.

Estates Tea Company

One such small business to have received funding from the first phase of CIEF is Newcastle-based tea merchant Estate Tea Company, founded by local entrepreneur Tom Webb, which specialises in single estate, small batch and hand blended teas (pictured). The business supplies its teas to cafes, restaurants and hotels across the UK, as well as operating its own cafe and eatery in Newcastle. Funding from CIEF, via CDFI Finance For Enterprise, enabled Tom to relocate from a small café in Gateshead to a larger former plumber’s merchant which he has transformed into a day-night haven for tea lovers. Since opening the new venue, the business has increased its trading hours, creating several new local jobs. Funding has also supported the expansion of blending facilities and an increase in customers stocking its tea range, from approximately 50 to over 80.

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. 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. When local businesses flourish so do local communities and we hope our leadership within this second phase of CIEF will see many more areas of the UK succeed.”

Elyn Corfield

CEO of Business and Commercial Banking, Lloyds Bank

What we have achieved through CIEF since its launch five years ago provides evidence that investing into under-served communities, and place-based approaches are both possible and credible. This new phase, crucially, provides a continuity of capital and an opportunity to build on the good foundations already laid. It is particularly heartening to see that funders are demonstrating a long-term commitment to the CDFI sector as a key channel for connecting capital with the communities who need it most. In collaboration with our partners, we are confident that CIEF can make a huge difference to people’s lives and livelihoods, at a time when many households are struggling with the cost of living and volatile economic conditions.

Alastair Davis

CEO, Social Investment Scotland

At Big Society Capital we care deeply about building fair opportunity through expanding the reach of investment into communities and supporting access to a more diverse set of business owners. Like the small enterprises they serve, the dedication of CDFIs to create long-term impact deserves greater backing. The combination of their hard work, and vital tools such as the Recovery Loan Scheme guarantee, has unlocked the potential to draw in more capital from institutional investors such as Lloyds, whom we are delighted to co-invest with in this fund. We are thrilled to see the work of partners come together in the next stage of CIEF and especially to see how the positive track record of these CDFIs is being noticed!”

Anna Shiel

Chief Investment Officer, Big Society Capital

Kieron Boyle, CEO, Impact Investing Institute said: “We are seeing increasing momentum in support of CDFIs, who play a critical role for people and enterprises that are not well served by mainstream banks. 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. Increased access to capital will ensure that they continue to reach underserved people and places, boost economic growth, promote employment creation, and reduce inequality. This is a landmark moment for the sector which we hope will pave the way for other mainstream banks to invest in CDFIs.”

Wherever they live, entrepreneurs need the right finance at the right time to develop their businesses. Yet many viable businesses based outside London or led by people from an ethnic minority background or by women, struggle to access the finance they need to grow. Lending from the UK’s CDFIs is meeting this gap, creating thousands of thriving businesses and banks’ future customers."

Theodora Hadjimichael

CEO of Responsible Finance which represents the UK's CDFIs

Theodora continued: “We are thrilled to welcome Lloyds Bank's commitment to our sector and the small businesses we serve, alongside BSC's valued longstanding support. As we announce this historic investment, we urge other mainstream banks to join Lloyds. We call on Government to extend the Recovery Loan Scheme (RLS) which has proven so effective at unlocking finance for SMEs. RLS is a crucial way for securing investment like this and channelling it to underserved but viable businesses.”