Responsible Finance forges transatlantic partnership for post-Brexit era

Community finance organisations in the UK and the US have formed a partnership to boost the sector through challenging times, says Jennifer Tankard

We’re hearing plenty about how and when the UK will achieve international trade deals and agreements with other nations. Remainers and Brexiteers alike are probably united on something: hoping the UK can achieve sensible terms to allow our businesses to trade internationally after we exit the EU.

But the UK’s responsible finance providers – catalysts for local economic development – don’t need to hope, they are already forging new and stronger relationships in different parts of the world. This month the organisation I’m privileged to work for, Responsible Finance, signed a historic partnership agreement with the US-based Council of Development Finance Agencies (CDFA).

As the two national bodies representing the development finance industries in the UK and US, Responsible Finance and CDFA will work together in a transatlantic exchange to boost finance practitioners in both nations.

So what’s that going to mean? Well, the exchange will help foster best practices, collaboration, learning and a greater understanding of how economic development and infrastructure is financed in the two nations.

We have a special relationship with the CDFA and this new agreement means that by working together we can achieve more than the sum of our parts. Our research, webcasts and visits will enable finance providers from both sides of the Atlantic to take advantage of learning, funding and training opportunities.

This is good news for the businesses, communities and people that our members serve – those that can’t access finance elsewhere. They are already dependent on a strong national network of responsible finance providers; a network that continues to increase access to fair finance across the UK.

In 2016, the UK’s responsible finance providers lent £103m to 9,600 small businesses, creating 8,200 new businesses and creating or saving 14,900 jobs. That’s on top of the £116m lent to 555 social enterprises, £20m lent to 37,000 individuals, and £3m lent to 389 homeowners.

There are lots of difference between the sectors in the US and the UK. In the US, the community development finance institution (CDFI) industry has moved a long way from its beginnings more than two decades ago.

At the end of 1997, there were 196 certified CDFIs with total assets of $4bn. Today, there are 1,131 certified CDFIs, with total assets of $136bn.

The number of CDFIs has grown by more than 470%, and total assets have risen about 390%. Many US CDFIs are involved in complex urban regeneration programmes on brownfield sites and play an important role in post-disaster recovery activity. In the last year, CDFIs have provided $6.1bn in loans and investments in small towns and rural communities and over $757m in investments in Native areas.

But in moving towards involvement on larger, more complex projects, many CDFIs have lost their connection to delivering micro-finance to businesses, an area that UK responsible finance providers are particularly strong at.  Through our partnership we can share our expertise and knowledge about the impact micro finance can have on local economies.

The development finance industry in the US also receives over $200m per year of public subsidy, together with supporting legislation such as the Community Reinvestment Act (CRA). The CRA encourages commercial banks to work in partnership with CDFIs to ensure that the needs of all borrowers are met, including those in low income communities. But with a new President who is less committed to decades of cross party support for the sector, our US colleagues are looking to us to see how a sector can thrive without this level of government support.

The development finance community in the UK and US has, for several years, exchanged valuable peer learning and networking. Responsible Finance and CDFA have benefitted too, sharing knowledge about access to capital and the use of quality standards to distinguish the sector from other parts of the financial services market. But thanks to this partnership agreement, now we’ll be able to do more.

So if the seeming lack of progress in Brexit negotiations and the doom and gloom in mainstream media coverage is getting you down, then join me in celebrating this international agreement, which will benefit hundreds of finance providers, all of which support economic development and have an impact on their local economies.