Both lenders aim to drive inclusive growth across the UK by unlocking funding for underserved small businesses that struggle to access finance.
British Business Bank will invest up to £150m (€143m) in a community funding initiative, supported by the UK’s Department for Business and Trade, while US lender JPMorganChase will donate £4m to a programme aimed at accelerating growth, set up by Responsible Finance, the national membership body for responsible finance providers.
Both investments will enable so-called community development finance institutions (CDFIs) to support more small- and medium-sized businesses (SMEs) in the UK that have a hard time accessing the finance they need from banks and other sources.
Non-profit lenders such as CDFIs “can play an important role in providing these businesses with much needed financing, however, they often struggle with limited capital themselves and require investments to enhance their systems,” said Conor Hillery, deputy chief executive Europe, the Middle East and Africa at JPMorgan.
Boosting capacity
JPMorganChase’s £4m commitment “has the potential to provide a major boost to the capacity and impact of the CDFI sector”, said Louis Taylor, chief executive officer at British Business Bank.
“As many of our small business customers know, you need funding and support to scale up even if you know there is demand,” said Theodora Hadjimichael, chief executive officer of Responsible Finance.
“This package of lending capital from the British Business Bank and operational funding from JPMorganChase means that CDFIs can grow to turn the tide on the funding struggles that many small businesses around the country face,” Hadjimichael said.
CDFI lending growth
The two new programmes seek to grow CDFI lending to £500m by 2029, from £102m last year, according to Responsible Finance. This will unlock an additional £1bn for 15,000 SMEs in the UK’s most disadvantaged areas, the trade association calculated.
Some 98% of loans by CDFIs last year were made outside of London, to sectors ranging from retail, manufacturing, professional services, hospitality and construction to energy and health and social care. Forty-one percent of these loans went to firms led by women, while almost one quarter went to ethnic minority-led businesses.
As previously reported by Impact Investor, Lloyds Bank in May became the first mainstream lender in the UK to invest in CDFIs .
