Bootstraps or Braces? The Regulation of Community Development Finance Institutions
The paper states that there is no logic, no economic sense nor any morality in restricting access to capital for excluded groups. In an attempt to answer the question "what regulatory framework will be most appropriate for Community Development Financial Institutions (CDFIs) in the UK?" It assesses the overall regulatory framework for financial services and what the key trends are likely to be.
The paper examines the the current legal and regulatory status of CDFIs, including perceived problems and future needs. Its findings include:
- Role of regulation is to achieve the same protection and objectives appropriate to other financial services, but in a clear and enabling way that reduces the possibility of such discrimination, as exclusion can accentuate underlying patterns of social disadvantage like low income and inadequate services and amenities;
- Focus should be on social banks, community loan and microfinance funds and the key success factor of CDFIs;
- Options for future regulation, including the case for and against any new policy action.
The paper concludes that CDFIs need to find a niche that is recognized both in terms of appropriate regulation for its models of business and in terms of special status for its social purpose in the face of fast changing financial services regulation.
