Financial Inclusion, Market Failures and New Markets: Possibilities for Community Development Finance Institutions in Australia

by Ingrid Burkett and Belinda Drew, A Foresters Community Finance Occasional Paper; October 2008.

Foresters Community Finance of Queensland argues that the lack of access to affordable capital is the major challenge to the growth of the fourth sector in Australia. In this report, authors Burkett and Drew broaden the traditional definition of financial exclusion in Australia to include not just individuals and families but also groups and organisations such as civil society organisations, social enterprises, or micro businesses. Groups as well as people are being denied access to essential capital for growth. They write,

“The range of capital options under the heading of ‘social investment’ is not generally available in Australia, though they have been explored extensively in the UK and the US. The development of these forms of capital in the Australian context will help address the financial exclusion of social enterprises, social businesses, eco businesses and microenterprises.”

Change is possible. This is a turbulent time in the Australian financial regulatory landscape with some states introducing caps on rates and fees and the Federal government taking over consumer credit regulation in 2010. The authors argue that this is not enough to address the regulatory vacuum for new forms for social investment. In the UK, specific legal structures recognise the blended nature of social enterprise: both the social goals and the commercial imperatives. They assert that Australia can better support these enterprises through Community Development Financial Institutions (CDFIs). Elsewhere these institutions have helped individuals and organisations access funding to address a range of social issues “from community revitalisation to affordable housing, small business development, job creation, community asset building, microfinance, fair personal finance, community economic development and social enterprise.” The final pages of the report showcase how Australia might develop a CDFI sector.

To order the report:

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