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Top Policy topic #1584

Subject: "CDFI's" First topic | Last topic
Sarah @ Melin
                              

Income Advisor, Melin Homes, Torfaen
Member since
01st Oct 2007

CDFI's
Wed 23-Sep-09 12:51 PM

Hi Everyone

Just wondering if anyone has come across any bad practices or stories concerning CDFI's (especially when people default on loans)

thanks
Sarah

  

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Replies to this topic
RE: CDFI's, ariadne2, 24th Sep 2009, #1
RE: CDFI's, Gareth Morgan, 24th Sep 2009, #2
      RE: CDFI's, sanwyp, 24th Sep 2009, #3
           RE: CDFI's, clairehodgson, 25th Sep 2009, #4
                RE: CDFI's, Sarah @ Melin, 07th Oct 2009, #5
                     RE: CDFI's, cggraham, 24th May 2010, #6
                          RE: CDFI's, Derek, 24th May 2010, #7
                               RE: CDFI's, Gareth Morgan, 25th May 2010, #8
                                    RE: CDFI's, cggraham, 27th May 2010, #9
                                         RE: CDFI's, nevip, 27th May 2010, #10

ariadne2
                              

Welfare lawyer and social policy collator, Basingstoke CAB
Member since
13th Mar 2007

RE: CDFI's
Thu 24-Sep-09 05:15 PM

Thick I know - but what's a CDFI?

  

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Gareth Morgan
                              

Managing Director, Ferret Information Systems, Cardiff
Member since
20th Feb 2004

RE: CDFI's
Thu 24-Sep-09 07:01 PM

You really don't know?

Community Development Finance Institutions (CDFI) are independent organisations, which provide financial services with two aims to generate social and financial returns.

CDFIs supply capital and business support to individuals and organisations in disadvantaged communities or under served markets.

They provide loans of last resort to small and medium seized enterprises that have a proposal, which is considered viable but where they have been unable to obtain a bank loan.


(... or so Google tells me)

  

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sanwyp
                              

benefit advice officer, Three Rivers Housing Association, Co Durham
Member since
26th Sep 2007

RE: CDFI's
Thu 24-Sep-09 07:25 PM

Now I was not brave enough to ask 'what is CDFI's' and my search did not give me the answer!! Next time I will ask, but perhaps those posting should spell it out for us dim wits!

  

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clairehodgson
                              

solicitor, CMH Solicitors, Durham
Member since
09th Apr 2009

RE: CDFI's
Fri 25-Sep-09 09:49 PM

http://www.cdfa.org.uk/cmframe.php?prmid=1200

i didn't know either and put quote marks round for my google search...

acronyms are awful and we do use too many of them...and thus we're all frightened to ask when one pops up we've never heard of.

  

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Sarah @ Melin
                              

Income Advisor, Melin Homes, Torfaen
Member since
01st Oct 2007

RE: CDFI's
Wed 07-Oct-09 02:24 PM

I must apologise re the jargon talk - I was the poster of this query.....

I don't want to go over what has been previously written as it's correct, basically a CDFI is a lender with a higher rate of interest than a credit union but less than a door step lender (provi etc).

There is a CDFI about to open it's doors close to us and I was just wondering what their recovery methods were like, i can foresee some trouble ahead.....

thanks
Sarah

  

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cggraham
                              

principal welfare rights officer, Durham County Council Welfare Rights
Member since
25th May 2006

RE: CDFI's
Mon 24-May-10 09:28 AM

We have a CDFI operating in our area.

My concern is that they are connected to a Housing Association and offer loans to clear rent arrears etc.What type of money advice would they give-ethically would they try and get it written off?

Interest rates are anything from 21.9% to 30%.

We wouldn't take credit at these rates why should people on low incomes?

Something just doesn't sit well.

Richard Titmuss said 'services for poor people will be poor services.'

i'm afraid this might be the case here.

  

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Derek
                              

CAB Adviser, Esher CAB
Member since
09th Mar 2004

RE: CDFI's
Mon 24-May-10 04:51 PM

"What type of money advice would they give"

The impression I get from a little reading on the net is that they are not in the business of giving advice. They seem to be more a competitor for doorstep lenders such as Provident (maybe charging a lower interest rate?).

"We wouldn't take credit at these rates why should people on low incomes?"

I know it sounds defeatist but it was ever thus! In my money advice work I come across a lot of people who have borrowed from doorstep lenders - some of them time after time. They do it because no other avenue is open to them & they are often already indebted to main stream lenders. And then there are the real loan sharks - where the interest rate can rocket (fortunately I rarely come across them!). Of course, doorstep lenders can (& do) claim to be providing a service - &, to be fair to them, if the borrowers are careful & act responsibly there is justification in that. And they will say their interest rates are set where they are in the expectation of a certain level of bad debts.

"Something just doesn't sit well"

If the Housing Association is referring tenants to the CDFI then I agree with you. I assume the tenant gets the loan but doesn't actually see the money - it goes straight to the HA. They are then happy because the arrears are cleared but the tenant has to make sure they keep uptodate with rent & repay the loan & the interest. From the tenant's perspective it would be better to have an agreement with the HA to pay current rent + £x p wk off the arrears. If they are not being given an alternative option on these lines then the arrangement might be questionable.

BUT there is one scenario where it might be in the tenant's interest to take a CDFI loan. If the tenant has other debts & intends to go into a DRO or bankruptcy rent arrears would not be wiped out but a debt to a CDFI would be. (Caution is needed of course - you can't get credit when you know you are insolvent & still get it wiped out in bankruptcy.)

  

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Gareth Morgan
                              

Managing Director, Ferret Information Systems, Cardiff
Member since
20th Feb 2004

RE: CDFI's
Tue 25-May-10 02:10 PM

This is the National Housing Federation chain of moneylenders, MyHome Finance, I assume.

Funded by housing associations, a high-street bank, DWP and some major trusts, the pilot is aiming to open eleven shops in the West Midlands (they are trying to open near Brighthouse shops).

According to their own document:

"In contrast to most credit unions lending to this part of the market, MyHome Finance will be sustainable after initial start-up capital injection. The only income that it will generate to deliver a sustainable business is interest on loans. Accordingly, loans will be priced for risk: typical APRs will be above 50%, about £25 repaid on top of every £100 borrowed."

"They seem to be seriously knocking Credit Unions who they seem to see as 'competition' and they accuse them of being too cheap:

"This increases the urgency to develop social business models for affordable credit provision that are not dependent on significant ongoing Government subsidies. This will be difficult through credit unions which, capped at
lending at 27% APR, cannot fully price for the increased risks of sub-prime lending . For this reason and others it is likely that the Community Development Finance Institution (CDFI) model will become increasingly important in providing alternatives to expensive commercial lenders like Provident and pay-day loan shops."

They're using Housing Associations to target 'customers and aiming to open, adding Hereford I'm told, "... in Wolverhampton, Walsall,
Erdington, Acocks Green, Birmingham city centre, Dudley, West Bromwich, Telford, Tamworth, Worcester and Coventry. To the customer these will appear as a branded new player in the sub-prime loan market. Housing associations will act as the ‘route to market’ through tip-ins and promotional literature in mailshots and
newsletters .... Appointments will be booked through a central telephony system and a lean staffing structure will keep costs low and productivity high.... housing
associations will have regular proof of the return on their investment."

They're also pressing CABx to provide, with no funding, an advice presence in the shops, giving them more credibility and associating, in my opinion, CABx dangerously with a pretty dubious venture.

  

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cggraham
                              

principal welfare rights officer, Durham County Council Welfare Rights
Member since
25th May 2006

RE: CDFI's
Thu 27-May-10 09:17 AM

Seems incredible that rather than have a review of the working of the Social Fund and the adequacy of Social Security levels that the DWP should seek to support CDFI's which lend to the very poorest in our society at a rate of up to 30%.

To boot it gets financial support from banks that taxpayers bailed out and they get returns of 30% on the money.

Are we ending up in situation whereby the very poorest and vulnerable in society are now assisting banks back into profit?

If this is what financial inclusion come to mean no wonder that there is no mention of it in the coalition manifesto.I seem to remember that the last Govt were criticised when proposing 30% rates of interests on Social Fund loans as 'state sponsored money lending'.Seems they got it in by the back door.

I understand all the arguments that CDFI's might say that at least we are better than money lenders,provident,brighthouse on interest rates etc

However-has the development of decades of Social Policy really come to this?

Seems notions of altruism,kindness towards those down on their luck or least fortunate than ourselves have gone out of the window.Now the poor are a cashcow.Obviously there is money to be made in the Poverty business.

  

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nevip
                              

welfare rights adviser, sefton metropolitan borough council, liverpool.
Member since
22nd Jan 2004

RE: CDFI's
Thu 27-May-10 09:23 AM

Thu 27-May-10 09:24 AM by nevip

Well nobody can say that New Labour were not a redistributive party. Just in the wrong direction thats all!

  

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Top Policy topic #1584First topic | Last topic