The impact of COVID-19 on UK community finance institutions – Implications for local economic development

Vik, Pål M; Curtis, Joanna; Dayson, Karl T

Abstract

UK community finance institutions play an important role in deprived neighbourhoods by serving households and businesses unable to access mainstream finance. This paper analyses the short-term effects of the Coronavirus pandemic on the activities and sustainability of the community finance sector by analysing longitudinal survey data for 40 providers and follow-up interviews with 25 organisations. COVID-19 resulted in an acceleration of the shift to online service delivery and temporary and permanent branch closures among community finance institutions. Further, the demand for, and volume and value of lending fell significantly during the first lockdown only recovering by the end of the summer 2020. This resulted in lower income, greater costs and lower regulatory ratios. Smaller providers in a weak financial position with more financially vulnerable customers were worst affected by the pandemic. We argue the pandemic may reduce access to finance for the financially excluded through the intensification of the shift to online services and by increasing the risk of providers serving the poorest folding or being merged with larger providers.

Citation

Vik, P. M., Curtis, J., & Dayson, K. T. (2023). The impact of COVID-19 on UK community finance institutions – Implications for local economic development. Local Economy, https://doi.org/10.1177/02690942231208916

• Journal Article Type: Article
• Acceptance Date: Oct 5, 2023
• Online Publication Date: Oct 19, 2023
• Publication Date: Oct 19, 2023
• Deposit Date: Oct 6, 2023
• Publicly Available Date: Oct 19, 2023
• Journal: Local Economy: The Journal of the Local Economy Policy Unit
• Print ISSN: 0269-0942
• Publisher: Taylor and Francis
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1177/02690942231208916
• Keywords: General Economics, Econometrics and Finance