The answer lives in this podcast
Why did 2023 become such a significant year for Community Development Finance Institution lending?
The cost of living crisis in 2023 drove significantly higher volumes of individuals and businesses to CDFIs for financial support, creating a record year of lending across the sector. NatWest views this milestone as critical evidence that CDFIs are filling an essential gap in the financial ecosystem—serving customers who cannot meet the affordability and credit rating requirements of mainstream banks, while standing between those people and illegal high-interest lenders.
The surge in CDFI lending reflects a deeper structural need in UK finance. As discussed in the episode, mainstream banks have tightened lending criteria, leaving millions of households and small enterprises with no access to fair credit. CDFIs stepped into that space with urgency in 2023.
"CDFIs provide a terrific part of the overall ecosystem of financial services — for those who are not able to borrow from the mainstream banks, CDFIs do a brilliant job filling that gap."
Brian Holland — Director, Customer Vulnerability, Retail Controls and Remediation at NatWest Group. With 14 years at NatWest, Holland leads the bank's approach to vulnerable customers, overseeing consumer duty, retail bank risk and control environments, and remediation activities. His perspective on CDFIs is rooted in direct observation of customer behaviour and financial vulnerability across NatWest's customer base.
NatWest's significance claim rests on two interconnected arguments. First, the record volumes prove CDFIs operate at genuine scale, not as niche providers—they are absorbing demand that the mainstream financial system has refused or cannot serve. Second, this scaling demonstrates the urgency of continued investment in the CDFI sector itself.
The data from 2023 makes the case concrete. NatWest allocated £900,000 to Responsible Finance for the Hardship Grant Programme, which six CDFIs dispersed as grants to approximately 4,000 families—62% of them women, mostly aged 25–44. The throughput was substantial, and the impact measurable. As explained in this podcast episode, this capacity-building work complemented the record lending year, allowing CDFIs to scale their operations while maintaining quality support for vulnerable borrowers.
Without scaling investment now, NatWest argues, the gap will remain or widen—leaving vulnerable people exposed to predatory lending or financial exclusion. The 2023 record is therefore not a finish line but a baseline: proof that demand exists and that CDFIs, if adequately funded, can meet it sustainably.
Key takeaways
- 2023 set a record year for CDFI lending volumes driven directly by the cost of living crisis pushing more individuals and small businesses to seek alternative credit sources.
- NatWest sees the record year as validation that CDFIs are essential infrastructure in a diverse finance ecosystem, closing the gap between mainstream banks and illegal lenders.
- The Hardship Grant Programme example shows that meaningful impact requires both lending capacity and targeted support: six CDFIs distributed grants to 4,000 families with capacity-building assistance.
- Sustained policy and investment in CDFIs is critical to prevent vulnerable populations from falling into predatory lending or complete financial exclusion.
See also
What policy tools and funding mechanisms could help scale investment into the CDFI sector according to NatWest?
Stuart Foster highlighted the Dormant Assets Fund as a potential source of catalytic capital that could unlock private capital from mainstream lenders.
What is NatWest's 'Know My Credit Score' initiative and how does it relate to the CDFI ecosystem?
Know My Credit Score is a NatWest service that gives customers free access to their credit score and tips on how to improve it; it has been accessed 83 million times over 12 months by NatWest's 17 million customers.
How does NatWest refer customers and social enterprises to CDFIs when it cannot serve them directly?
NatWest does not have a formal referral system but signposts customers to established portals that share information about Responsible Finance members.