Responsible Finance Sector Impact on SMEs and Social Enterprises
Explore the role of responsible finance providers in lending to SMEs and social enterprises, highlighting their impact on economic development, job creation, and business growth through affordable financial support and tailored services.
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Presentation Transcript
About the responsible finance sector 23 February 2018
Profile of responsible finance providers 43 responsible finance providers lending to SMEs, social enterprises and consumers In 2017 lent 67 million to 5,000 SMEs, 142 million to 360 social enterprises and 22 million to 55,000 consumers Purpose: Affordable financial and non-financial support to those unable to access mainstream finance Company structure: not-for-profit (companies limited by guarantee, bencomms, CICs, charities) Only lending sector that measures lending outcomes and can report on economic impact Sources: Responsible Finance 2017
What is responsible finances role in the market? What differentiates responsible finance: We provide additionality Illustration of lending market We offer a personalised service We use technology to enhance how we operate, not replace what works We are transparent about pricing We are built into local ecosystems with fast route to market Sources: Responsible Finance 2015
Profile of responsible finance providers lending to SMEs 27 responsible finance providers lending to SMEs Lent 67 million to 5,072 SMEs in 2017 Products: 100% offer unsecured loans 52% offer secured loans 63% offer formal business mentoring 7% provide equity 15% let their property as office space for businesses Loan characteristics Start-up Micro businesses SME Average loan size 8,800 20,500 41,900 Average term 4 years 3.5 years 3.5 years Average interest rate 6% 14.% 14% Secured loans (#/ ) 0%/0% 15%/40% 15%/40% Default rate 90+ days in arrears: 9.3%/ Written off: 9.0% Impact: Created 4,270 new businesses, safeguarded 779 existing businesses; created 5,889 new jobs, safeguarded 4,270 at-risk jobs Sources: Responsible Finance 2017
Profile of responsible finance providers lending to social enterprises 12 responsible finance providers lending to social enterprises Lent 141.7 million to 363 social enterprises in 2017 Products: 100% offer secured loans 80% offer unsecured loans 30% offer informal advice 7% provide equity Loan characteristics Loan fund Social bank Average loan size 94,000 884,900 Average term 4.9 years N/A Average interest rate 7.94% N/A Secured loans (#/ ) 26%/45% 100%/100% Defaults 90+: 3.7%/ Written off: 6.9% Impact: Created 27 new social enterprises, safeguarded 277; created 402 new jobs, safeguarded 4,259 jobs at risk Sources: Responsible Finance 2017
Profile of responsible finance providers lending to consumers 11 responsible finance providers lending to consumers and homeowners Lent 22 million to 55,348 consumers and 3.8 million to 379 homeowners in 2017 Products: 100% offer unsecured loans 40% offer budgeting advice 40% offer mobile/web friendly application processes Loan characteristics Consumer Homeowner Average loan size 400 10,000 Average term 9 months 7 years Average interest rate 136% 4.6% Secured loans (#/ ) 0%/0% 31%/78% Defaults Written off: 8.4% 90+ days: 0.1%/ Written off: 0.3% Impact: Helped customers deposit 3 million in savings accounts; helped over 18,000 consumers avoid using high cost credit Sources: Responsible Finance 2017
Raising capital to on-lend Responsible finance providers do not take deposits and must raise all capital to on-lend from external sources In 2017 the sector secured 62 million in new capital: 55% grants from central government 31% investment from banks, social investors, and high net worth individuals 8% grants from EU, local government, trusts and foundations Responsible finance providers lending to SMEs and social enterprises can use the Enterprise Finance Guarantee (EFG) to cover net 15% of losses in a portfolio and the Community Investment Tax Relief (CITR) to give investors tax relief of 25% of their investment over 5 years Responsible finance providers pay between 4-12% return on investment Sources: Responsible Finance 2017
