ABSTRACT
The impact of CDFIs: summary of argument Over the last three years, from 2007 to 2010, the people and institutions in this book have certainly been subject to the ancient Chinese curse of ‘living in inter esting times’. They have ex peri enced, in that time, a global fin an cial crisis, the deepest recession since the 1930s and, arising from both of these, a programme of cuts in pub lic expenditure – focussed, as we discussed in the last chapter, on wel fare budgets. Ideally, CDFIs should be well positioned to provide a counter poise to this, by supplying social protection in the form of loans rather than grants. But CDFIs themselves also are in peril – since from early 2011 onwards they will lose the two main sources of state subsidy which have sustained their growth up to this point: the DWP Growth Fund and the regional de velopment authorities (RDAs), both of which are scheduled to terminate in 2012.1 In the light of what we have learned in this book, are they worth preserv ing? In which case, can they preserved, and if so how? Our argument is that they are worth preserv ing – because they offer a form of social protection which is cost effect ive and which potentially provides a fin an cial route out of the pov erty trap – but that there is a grave risk that many of them, given their current vul ner abil ity, will not survive. The rationale for their exist ence is that they overcome a market failure, which is the in abil ity of many people to borrow even though they have potentially bankable pro jects. In all the institutions which we have ana lysed (Chapter 4), the average increase in income between 2007 and 2009 in the CDFIs we surveyed was in excess of that in the control group; signi fic antly so in the case of Scotcash, DSL and Derby Loans business loans. In these institutions, the availabil ity of CDFI credit helped to provide low income people with a buffer against recession. It did this in the short term by en ab ling clients to borrow and thereby afford additional consumption goods, but in the longer term especially among business CDFIs by increasing their assets, and in some cases also (Chapter 5) by de veloping social and business networks within the com mun ity. We examined in some detail the factors which distinguish successful from unsuccessful clients, including mem ber ship of social networks, availabil ity of loan advice, abil ity to escape from dependence on doorstep money lenders and finally (Chapter 6) the pattern of wel fare bene fits received.
