Announcement on Pilot for CDFI Sector Expected Soon
Thursday, 14th October 2010 at 2:15 pm
The Federal Government is expected to announce the participants in a national pilot scheme to grow the Community Development Financial Institution (CDFI) sector in Australia by the end of the month – almost a year after a scoping study recommended the scheme.
Sources have told Pro Bono Australia that the pilot expected to get underway before the end of 2010.
The Federal Government announced in January 2010 that it would provide $7.5 million to pilot a scheme for developing a Community Development Financial Institution sector in Australia.
The Federal Minister for Families, Housing, Community Services and Indigenous Affairs, Jenny Macklin said at the time that the scheme aimed to get philanthropic, business and government support to cover the cost of lending, allowing low interest loans to be extended into the community.
In announcing the funding for the pilot, the Government said there was some evidence to suggest that despite the existence of well established banking and financial services in Australia there may be individuals, groups and organisations that are underserved by mainstream markets.
It said that this form of financial exclusion can lead to or exacerbate an inability to participate fully in society and an increased risk of financial stress and hardship, either through resorting to riskier forms of credit or going without goods or services that would facilitate their economic or social participation.
A scoping study by Social Ventures Australia in late 2009 found that the CDFI sector was very small in Australia, especially in comparison to the UK and the US and this needed to change.
The Government is believed to have received 12 applications to take part in the pilot program.
The Government said the pilot would seek to test the potential of the community finance model to build the capacity and resilience of disadvantaged Australians who have difficulty accessing mainstream financial services and products.
It said it would provide one-off grant funding for business development purposes to selected community finance organisations offering fair, affordable and appropriate products and services aimed at the financial inclusion of disadvantaged Australians.
The pilot will also facilitate access to capital and loan funding through the establishment of an Investment Circle – partnerships between the community development financial institutions and financial investors who can provide capital funding to the eligible applicants who participate in the pilot project. The purpose of the investment circle is to facilitate access to capital funding that otherwise may not have been available to organisations.
A spokesperson for the Government would not confirm an announcement date for the successful applicants.