Many small businesses access finance from socially motivated lenders such as Community Development Finance Institutions (CDFIs), but CDFIs themselves face barriers to achieving long-term sustainability and securing capital at scale to meet the demand of small businesses.

SIS, which is itself a CDFI and has been investing in the social sector since 2001, has played a leading role in bringing together Lloyds Bank, Big Society Capital (BSC) alongside three CDFIs (BCRS Business Loans, Business Enterprise Fund and Finance For Enterprise) to create the Community Investment Enterprise Fund (CIEF) which will provide capital for around 800 small businesses, supporting around 10,500 jobs.

The funding announced today follows on from a successful first phase, also managed by SIS, which saw the deployment of £66m by four CDFIs in England to meet the needs of more than 900 small businesses operating in disadvantaged areas, supporting both jobs and economic activity. Launched in 2018, CIEF was initially funded with £30 million from Big Society Capital.

With the roll-out of CIEF in England and Wales, SIS is now planning for the creation of a similar fund in Scotland which can provide capital to CDFIs to support small businesses within their communities. However, SIS is calling for more backing from the UK’s mainstream banks to bring these plans to fruition.

Alastair Davis, CEO of SIS, said: “What we have achieved through CIEF since its launch five years ago provides evidence that investing into under-served communities, and place-based approaches are both possible and credible.

“Lloyds Bank’s involvement as the first mainstream lender to support the CDFI sector really helps to push this model into the mainstream now.

“On the back of CIEF’s success, it is our ambition at SIS to create a similar fund for Scotland. However, we’d like to see more institutional investors follow Lloyds Bank’s lead and invest in CDFIs as a route to building wealth in our communities and helping our small businesses prosper.

“By taking a collaborative approach, we can make a huge difference to people’s lives and livelihoods, at a time when many households are struggling with the cost of living and volatile economic conditions.”

SIS’s role as fund manager for CIEF aligns with its strategic action plan of ‘Turning up the Volume’ post-pandemic, and sees the organisation further increase its impact across the UK. Last year SIS launched two new funds – the Community Sustainability Fund aimed at helping individuals and communities most impacted by the cost-of-living crisis, and the Social Enterprise Just Transition Fund, targeting social enterprises in the North-East of Scotland and Moray.

SIS also continued to oversee, and fund manage the Scottish Investment Fund (on behalf of the Scottish Government), Scottish Social Growth Fund, Third Sector Resilience Fund and the Affordable Credit Fund (on behalf of the Carnegie UK Trust and the Scottish Government).

Elyn Corfield, CEO of business and commercial banking at Lloyds Bank, said: “Small and medium size enterprises are the heartbeat of the UK economy and as the largest domestic banking group, we have a proud history of supporting UK businesses to thrive.

“We’re therefore delighted to support the CDFI sector to back local businesses, with a focus on deprived areas, and ensure they have access to a range of financial options right for them.

“When local businesses flourish so do local communities and we hope our leadership within this second phase of CIEF will see many more areas of the UK succeed.”

Anna Shiel, chief investment officer at Big Society Capital, said: “At Big Society Capital we care deeply about building fair opportunity through expanding the reach of investment into communities and supporting access to a more diverse set of business owners.

“Like the small enterprises they serve, the dedication of CDFIs to create long-term impact deserves greater backing. The combination of their hard work, and vital tools such as the Recovery Loan Scheme guarantee, has unlocked the potential to draw in more capital from institutional investors such as Lloyds, whom we are delighted to co-invest with in this fund.

“We are thrilled to see the work of partners come together in the next stage of CIEF and especially to see how the positive track record of these CDFIs is being noticed!”