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The Government have already taken steps to introduce microfinance schemes to encourage entrepreneurs in deprived areas.
The Phoenix Fund, launched in 1999, was a time limited, £40 million fund which pump-primed the establishment of 63 community development finance institutions that serve disadvantaged communities around the country. 4,545 loans with at total value of £34,475,308 were provided by the Phoenix Fund, which closed in 2006. Future funding of CDFIs rests with the RDAs who have received a further £11 million of post-Phoenix transition funding for the 2006 to 2008 period specifically for the community finance sector.
Further assistance with micro-loans is available through the Local Enterprise Growth Initiative (LEGI) which was announced by the Chancellor in his 2005 Budget. It aims to release the economic and productivity potential of the most deprived local areas across the UK through enterprise and investment—thereby boosting local incomes and employment opportunities, and building sustainable communities.
LEGI is a £300 million programme in the first instance, spread over three years. 15 local authorities have already benefited from the first round. A further 14 local authorities will benefit from the second round. Local authorities that have been successful in securing LEGI funding in rounds one and two may introduce microfinance schemes to encourage entrepreneurship.
Finally, small businesses in disadvantaged areas may seek funding from the Small Firms Loan Guarantee (SFLG). This scheme provides loans from £5,000 upwards to small businesses with viable business plans that are unable to obtain a conventional loan because they do not have collateral or a proven track record. Current monthly usage is around 250 loans with a total value of around £20 million.