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Phoenix Fund

Answer

The Department commissioned GHK Consultants to undertake a wide-ranging evaluation of the first two rounds of Phoenix Fund support for Community Development Finance Institutions (CDFIs). GHK published its findings and recommendations in May 2004.The evaluation looked at many issues facing CDFIs in the provision of debt finance to enterprises in disadvantaged communities. This included the assessment of risk in relation to loan management. (The GHK report can be down-loaded from the ““Research and Statistics”” (Improving Access to Finance) section of the SBS website at: http://www.sbs.gov.uk).Through the Department's core funding of the Community Development Finance Association (CDFA), the trade association for CDFIs, more recent and specific research has been conducted into CDFI interest rates. A summary of this can be found in this year's ““Inside Out””, the CDFA's report on the industry for 2004. (Copies available through the CDFA website at: http://www.cdfa.org.uk).The CDFA's research concluded that CDFI interest rates vary, generally depending on the market being served, client type, loan size and term. Social enterprise lenders continue to operate with the lowest average rates at 9.22 per cent. static and +3.07 per cent. above base rate. A number of CDFIs targeting for-profit micro-enterprises use static rates with an average of 12.95 per cent., with others using variable rates with points above base rate at an average of +4.23 per cent.CDFIs serve a diverse range of customers unable to access all the finance they need from more conventional sources and their rates reflect the risks and cost bases of the particular circumstances in which they operate.

Secondary information

Type

Written question

Reference

764; 434 c112-3W;434 c116-7W

Session

2005-06

Subjects

Disadvantaged Community development Government assistance Interest rates Small businesses Phoenix Fund