§ Mr. LoveTo ask the Chancellor of the Exchequer what assessment he has made of the role of micro-credit in assisting the growth of enterprise in deprived communities; and if he will make a statement. [114636]
§ Mr. TimmsThe role of micro-credit was considered at length by the Policy Action Team 3 in their report, "Enterprise and Social Exclusion". People in deprived communities often find it difficult to find capital to start or grow businesses, for several reasons
they are themselves capital poor, and lack collateral to support small firm lending;a more fragile local economy increases the risk to lenders of business failure;the high unit cost of making small firm loans makes them less profitable to lenders; andaccessibility to lenders, where banks can appear to be unapproachable.While UK commercial banks are the major formal suppliers of external finance, new intermediaries such as Community Finance Initiatives (CFIs) can play a valuable role by acting as additional sources of credit in the community, including micro-credit facilities. The launch of the £30 million Phoenix Fund, which will be implemented in 2000–01, will include a challenge fund to help resource CFIs and provide loan guarantees to help co-finance commercial lending to CFIs.