Community Development Finance Research Articles

Exploring ‘Alternatives' in the Consumer Credit Market: Community Development Finance Institutions in the United Kingdom

Exploring ‘Alternatives' in the Consumer Credit Market: Community Development Finance Institutions in the United Kingdom

Bakrichhap Agro Tourism and Natural Products Private limited (BATNPPL): a case for community based entrepreneurship promoting integrated rural development

Learning outcomes The learning outcome of this study is to bring to the table of a wider intellectual audience, a unique model of community-based entrepreneurship, which is working wonders with its unique selling points (USPs) in promoting sustainability and conserving the ethos of villages and, at the same time, generating livelihoods through traditional farming techniques adopted by the rural population residing in the Himalayan region of India.The proposed case study can be used as a replicable model in other parts of rural India and other emerging economies to start and scale up a similar “integrated rural development model” through effective policy advocacy and public–private partnerships and to develop sustainable farmlands and livelihoods for rural India. It has a definite potential to be used as a pedagogical tool in postgraduate programmes offering courses in microfinance, financial inclusion, social and community entrepreneurship, sustainability, entrepreneurship, community development finance and rural immersions and public policy. Case overview This case study is set in the backdrop of 2023 having been declared by the UN as the International Year of Millets and India being the homeland for millet cultivation. The objective of the case study is to bring to the table of a wider intellectual audience, a unique model of community-based entrepreneurship operating in the Himalayan region of rural India. The community-based entrepreneurship model works on the USP of promoting sustainability and conserving the ethos of villages and generating livelihoods through traditional farming techniques. This case study traces the journey of Roopesh Rai (protagonist and the founder of Bakrichhap), the community-based entrepreneur and his challenges in setting up the enterprise. The narrative is built in the light of a series of interviews with Rai, the main protagonist and the founder of Bakrichhap, as well as the people of Goat village by Komal, a post-doctoral fellow in the area of community-based enterprises (CBEs). Through this narrative, the case writers’ endeavour was to understand how CBEs such as Bakrichhap were providing a means of integrated rural development in the hilly region of Uttarakhand, India. Also, how such enterprises were thereby curbing distress migration, unemployment and a large-scale erosion of the cultural heritage and traditional and indigenous farming techniques of the land. In the first seven years of the operations of this uniquely curated CBE, Rai endeavoured to iron out many bottlenecks. This case study also highlights the gamut of challenges faced by community-based entrepreneurs like Rai in designing strategy for growth and expansion. What strategy should Bakrichhap follow for expansion to the other regions of the country? Should all the three existing verticals of the enterprise be scaled up parallelly or should each individual vertical be expanded one after the other in a phased manner? Stemming out from the main dilemma of strategic expansion were the related issues of funding (finance) and the formation of an effective team (HR). Study level/applicability This case study can be used in undergraduate, graduate and executive programmes offering courses in microfinance, financial inclusion, social and community entrepreneurship, sustainability, entrepreneurship, community development finance and rural immersions and public policy. Research methods This comprehensive case study is written by using the triangulation of data collected through a series of personal interviews, website information, news articles, personal observation and field visits. The research design used is single case (holistic; Yin, 2003, 3rd edition). The timeline of this case study is 2021 to 2022 and place is Nag Tibba, Uttarakhand, a Himalayan state in North India. Supplementary materials Teaching notes are available for educators only. Case code CSS 3: Entrepreneurship.

Microcredit for enterprise in the UK as an ‘alternative’ economic space

One response to the major societal challenge of financial exclusion in the United Kingdom (UK) is microcredit lending for enterprise. Typically delivered via Community Development Finance Institutions (CDFIs) in the UK, these lending institutions can be conceptualised as ‘alternative’ economic spaces. Yet the nature of their alterity is unclear as categorisations of alternative-oppositional or alternative-substitute institutions are possible and could also be influenced by complexities in the UK relating to the welfare system and sustainability. Alterity is rarely static, being influenced by policies and regulation, and the nature of institutions’ alterity could have consequences for wellbeing, as different values and ideals underpin different conceptions of alterity which affect how these institutions operate. In this paper, the complexities of microcredit for enterprise lending within the UK are explored through in-depth interviews with UK ‘supply-side’ stakeholders. Conceptions of alterity are then used as an analytic lens to examine these results. Results suggest that these lenders remain in opposition to the mainstream as the needs of low-income individuals are embedded within their operating model. Microcredit lending is conceptualised in terms of responsible lenders offering fair credit to financially-excluded individuals using relationship banking practices. Such a conceptualisation provides a touchstone against which to assess shifts in lenders’ alterity and a platform from which to introduce legislative and regulatory changes to protect these ‘alternative-oppositional’ economic spaces. This paper begins to outline these responses that could help to ensure and grow a more community-engaged and varied local financial infrastructure within the UK.

The Comparison between Microcredit Finance and Community Development Finance to Alleviate the Extreme Poverty in Bangladesh: A Case Study of Shibalaya

This paper explains the comparison between Microcredit Finance and Community Development Finance to alleviate the extreme poverty in Bangladesh. According to the theory, Microcredit is a small loan (microloan) to be provided to those who have less collateral, it supports entrepreneurship and alleviates poverty through empowering women and uplifting entire communities by extension. On the other hand, Community Development Finance (CDF) focuses on personal lending and business development efforts in local communities by individual person or institution. The study obtained the opinions of 50 families from Shibalaya Thana under Manikgonj district in Bangladesh through a survey on the impact of Microcredit Finance and Community Development Finance to alleviate their extreme poverty. To conduct this study, qualitative (expert interview, focus group discussion) and quantitative methods was used. The study is based on primary data collection through questionnaires and Statistical Package for Social Science (SPSS) was used to analyze the data. The study found that both of these mechanisms have a significant role to alleviate the poverty who could utilize the loan properly. However, these two mechanisms for alleviating poverty have some demerits as well. Finally, this study came up with some recommendation to get more benefit from these two mechanisms to alleviate poverty in Bangladesh. Nevertheless, the results of the study are constrained by the size of the sample, area and robustness of the analysis.

Utilization of Endowments (Awqaf) in Financing Community Development Programmes In Kano Metropolis

Conventional sources for financing community development programmes appear to be inadequate in meeting people’s welfare needs. This inadequacy seems more pronounced given cuts in government spending. Even with reforms in community development finance, in the form of socially responsible investing, Muslim communities still face financial exclusion due to the interest-element in conventional finance instruments. This research examined the utilization of Islamic endowments (awqaf) in financing community development activities in Kano metropolis. Five research questions guided the study. The scope of the research was limited, in part, to exploring the nature, management and availability of awqaf in enhancing community well-being. An ex-post facto design was employed. Primary data were collected using structured interview and complemented with secondary data through documentary analysis. Data analysis involved the use of descriptive statistics and cluster analysis technique. The findings of the study include the disclosure that Islamic philanthropic endowments, especially for the provision of socio-economic facilities, are scarce in Kano metropolis. This contradicts the centuries-old tradition of the participation of Islamic charities in economic and social developmental services. From its findings, the study’s main conclusion was that awareness-creation campaigns and education, through collaborative endeavours, are essential in promoting the setting up of awqaf. Among its recommendations, the study suggested that a dynamic enlightenment drive is necessary to sensitize Muslims to appreciate the contemporary significance of endowments and utilize them as mechanisms for financing community welfare projects in Kano metropolis.

Supporting Social Enterprises to Support Vulnerable Consumers: The Example of Community Development Finance Institutions and Financial Exclusion

This article examines the role of social enterprises in providing fair services to vulnerable consumers, focusing on the vulnerability of low-income consumers to high-cost exploitative credit as a result of a lack of access to mainstream financial services. It will be argued that both the state and the corporate sector have a role to play in providing the means with which vulnerable consumers can overcome financial exclusion, through access to fair services. However, this cannot and should not be achieved through increased welfare provision or through reliance on corporate social responsibility initiatives alone. In rejecting solutions focused on increased welfare or voluntary corporate social responsibility initiatives, this article suggests that regulatory support for the development and growth of social enterprises, such as community development finance institutions, will most effectively give rise to a social framework in which vulnerability and unequal opportunity with respect to financial services is addressed.

Community Development Finance Institutions (CDFIs): Geographies of financial inclusion in the US and UK

The financial exclusion of enterprise is a concept that has been largely neglected by economic geographers. This is surprising given the attention dedicated to personal financial exclusion and alternative sources of finance. This paper compares financial inclusion policies in deprived areas of the United States (US) and United Kingdom (UK) through the example of Community Development Finance Institutions (CDFIs). CDFIs help overcome financial exclusion by providing local sources of loan finance to micro, small-and-medium-sized enterprises and social enterprises. Drawing upon interviews with key actors within the CDFI sector in the US and UK respectively, the paper aims to compare the CDFI landscape across the US and UK through the provision of finance for enterprise. This is in order to understand the geographies of finance that are being created by such alternative financial institutions thereby contributing to financial inclusion debates. The research concludes that although CDFIs do provide an important source of finance to excluded enterprises, policy initiatives have created uneven geographical coverage and market gaps leaving marked spaces of financial exclusion.

Towards a Performance Measurement Framework for Community Development Finance Institutions in the UK

Community Development Finance Institutions (CDFIs) are publicly funded organisations that provide small loans to people in financially underserved areas of the UK. Policy makers have repeatedly sought to understand and measure the performance of CDFIs to ensure the efficient use of public funds, but have struggled to identify an appropriate way of doing so. In this article, we empirically derive a framework that measures the performance of CDFIs through an analysis of their stakeholder relationships. Based on qualitative data from 20 English CDFIs, we develop a typology of CDFIs according to three dimensions: organisational structure, type of lending and type of market served. Following on from this, we derive several propositions that consider how these dimensions relate to the financial and social performance of CDFIs, and provide the basis for a performance measurement framework.

‘I’m not in it for the money’: Constructing and mediating ethical reconnections in UK social banking

Over the last decade a range of social banks and Community Development Finance Initiatives (CDFIs) have developed a social investment sector in the UK. Some of these organisations emphasise their belief in partnership, association, reconnecting and re-humanising the relationship between investors with borrowers in order to reap social returns. ‘Ethical’ investors are encouraged to take sub-market returns on their investments in order for surpluses to be distributed to the organisations’ beneficiaries. Some key theoretical and political questions include: how are investors enrolled in these initiatives? What discourses of ethics are constructed and how do investors relate to them? How do these discourses relate to debates in geography revolving around ‘caring at a distance’? Drawing on work on the Charity Bank and the Industrial Common Ownership Fund (ICOF), this paper analyses how these discourses are constructed and mediates the relationship between investors and borrowers. It explores stakeholders both investors’ and borrowers’ perceptions of these activities as well as the way investors construct their own reasons for investing.

Community Development Finance: A Neo-Market Solution to Social Exclusion?

Financial exclusion is increasingly being recognised as an important aspect of socio-economic inequality where disadvantaged individuals and communities are isolated from mainstream financial services, particularly affordable and readily available credit. In the face of these problems, social policy initiatives have emerged that have travelled under various names: social investment, micro-finance, community finance and community development finance. These initiatives are seen as the basis of a ‘new economics’ that will create self-sustaining local economies. The government is also promoting community development finance as an aspect of community regeneration with the aim of providing credit to poor communities to stimulate local enterprise and thereby reduce dependency on state support. The same approach is being taken to grant-funded community and voluntary organisations to encourage them into a neo-market approach to the delivery of services. This article explores the phenomenon of community development finance and assesses its proposed role in community regeneration and in relation to the community and voluntary sector.

Harnessing the Hidden Enterprise Culture: the Street UK Community Development Finance Initiative

Harnessing the Hidden Enterprise Culture: the Street UK Community Development Finance Initiative

Loan Repayment Performance in Community Development Finance Institutions in the UK

This paper identifies the key institutional factors that influence loan loss rates in Community Development Finance Institutions in the UK. Traditional bank credit assessment puts the blame of poor loan performance largely on the borrower. This is the first study of its kind to examine institutional characteristics of 16 CDFIs in the UK and assess their influence on the loan loss rates. The results show that 8 out of the 13 institutional characteristics examined significantly influence loan repayment performance. Although a vast body of literature supports the view that borrower characteristics are highly influential, our results provide strong evidence to show that institutional characteristics are equally important and both factors need to be taken into account if loan repayment performance is to be improved.