Most communities across Scotland have not been well served by the mainstream financial providers over the last years.  This has an impact in the viability and vibrancy of communities as providers of services and goods struggle to secure finance to continue operating or to develop further.  This is particularly the case for most small organisations and businesses. 

According to the Bank of England ‘Bankstats’, since 2011 banks have squeezed SME lending by 18% or £35billion. This is particularly the case for third sector organisations, social enterprises and community businesses who work in areas where there is either market failure, or provide goods and services to small rural populations.

Research carried out in 2014, amongst the Third Sector in Scotland, found that most social and community enterprises struggle to find social investment that was appropriate to their needs, in particular micro, unsecured and risk capital at an affordable cost. These findings have subsequently been consistently supported by other organisations undertaking similar social investment research in the intervening period.

Since 2011/2012, 90% of lending by Social Investors in the UK was in the form of secured loans with the result that social and community enterprises are increasingly in need of unsecured debt finance. Equally according to research carried out by BMG Research, in the same year 93% of social and community enterprises had sought investment of less than £100k.  

The importance of lending at this scale cannot be understated. It not only addresses financial necessity, but also the needs of communities all across Scotland. Unfortunately, it would appear that most lenders are reluctant to take on the high costs associated with micro and unsecured lending. 

Where the banks fail, another source of finance is needed and that is the people who are at the heart of communities. They can become ‘citizen investor’.  Investing for a financial return but also a social return to their communities to the mutual benefit of all.