Q: FaHCSIA refers to business development funding, is this to develop a business plan or to implement a business plan?
FaHCSIA business development funding is a one-off grant to implement various aspects of an approved business plan. It should be considered start up funding for the business model contained in the plan and cannot be used for loan capital.
Q: It is very difficult in one year to start up an innovative project, what are FaHCSIAs expectations?
FaHCSIA recognises that most likely it will take several years for an innovative project to be fully implemented in accordance with its business plan. This is why, given the limitations of the timing of the one-off funding, it is important for applicants to demonstrate that they can make progress against their business plan in the first year and for FaHCSIA to be realistic about what can be achieved in one year when framing its evaluation of the pilot.
Q: Does FaHCSIA want services in all States and Territories, including metro and regional coverage?
Based on the limited funding, we would not be looking for national coverage. There are currently no preconceptions of where CDFIs will deliver their products and services. FaHCSIA is expecting to fund 4 or 5 organisations and will aim to test different types and models of CDFIs as far as possible. There is a particular interest in testing a CDFI with products and services targeting Indigenous Australians.
Q: Is FaHCSIA interested in developing an Indigenous CDFI?
Yes, there is particular interest in testing a CDFI with products and services targeting Indigenous Australians.
Q: Are CDFIs separate organisations?
While FaHCSIA is open to a broad range of organisational types and different arrangements (see eligibility criteria), for the purpose of the pilot FaHCSIA envisages that the CDFI model being tested would operate independently in accordance with its own stand alone business model.
Q: Can we approach investors for capital prior to applications being submitted?
Yes, applicants can apply for 'grant funding only', if they have already organised their own sources of capital and loan funding. Such applicants would indicate they were not seeking capital or loan funding and their applications would not be distributed to the Investment Circle.
Q: What is the expected ratio of grant funding to investment funding?
There is no fixed ratio but FaHCSIA expects that it will be similar to overseas models that currently range between 1:1 to 1:5 grant:investment funding.
Q: What types of financial products meet the eligibility requirements, for example can it just be financial advice?
Any financial service and/or product that is directed to those disadvantaged Australians who are financially excluded is in scope for the pilot. While often when discussing the CDFI model reference will be made to loan products, other products and services such as financial advice, financial education, insurance, savings products etc will be considered.
Q: Are the products to be tailored to working clients only?
No, community finance products should be targeted at disadvantaged Australians, who are underserved by mainstream services but who could afford financial services and products and whose financial and social inclusion would be enhanced by access to these products. This target group may include low income earners, casual workers or welfare recipients.
Q: We currently provide Emergency Relief, Financial Counselling and the NILS program, are we able to use the exemption that we get from the NILS program for this project or do we need to get an AFSL?
No. The licensing exemption provided is specific to these programs. At this stage, if you are going to incorporate a lending product into your CDFI products you will need to meet the appropriate financial licensing requirements which can be found on the ASIC website. FaHCSIA is currently working with ASIC to look into any exemptions that may be available to applicants.
Q: Could a cash converter apply? Will the scale afford competition to payday lenders?
In principle a payday lender could apply for the program however it is unlikely that their current products or services would meet the fair and affordable aspect of the first criterion or that they could demonstrate a history of providing fair and affordable products to disadvantaged Australians. In addition, any new product that might meet these criteria would need to be quarantined and managed independently from other elements of the for-profit side of their business.
Q: Is Australia big enough for a CDFI sector when compared to the demand for the sector overseas and Australia is so small?
The pilot project will assist with determining the size of the market and the demand for these products so that the potential of the community finance model in Australia can be assessed.
Q: How will the pilot be evaluated? Will the evaluation be made public?
The evaluation framework is still being finalised but will likely include information from a range of sources including from the clients and service providers obtained through regular reports and client interviews. The extent to which the evaluation and its findings will be made public has not been determined.
Q: What criteria does the Investment Circle have?
There is no common set of agreed criteria that Investment Circle members will assess against. Rather each member will consider applications independently based on their own investment criteria. The pilot aims to facilitate access to potential investors but does not influence their investment decisions.
Q: Can we get an outline of the terms and conditions from the Investment Circle, such as their intellectual property rules? When will their disclosure be made?
There is no common set of terms and conditions for Investment Circle members. Such terms and conditions would form a part of the bilateral negotiations between each Investment Circle member and the applicant. In applying to an Investment Circle member, applicants could expect to be covered by the same IP and commercial-in-confidence laws that apply in the normal business environment.
Q: What if an organisation didn’t want to have their business plan circulated to certain members of the Investment Circle?
FaHCSIA has taken this into consideration. All applicants that indicate they would like their business plan to be distributed to the Investment Circle will be contacted by email or telephone and given the option to choose to whom their application is distributed. If there is no response within 3 working days, and reasonable means have been made to contact the applicant, the application will be distributed to all applicants on the panel unless otherwise specified in the application.
Q: Will the pilot look into the uptake of investments by the Investment Circle?
Yes, FaHCSIA is evaluating both the CDFI models and their ability to be sustainable which includes all funding arrangements available to the CDFI.
Q: What if really good business proposal comes in and the Investment Circle does not want to be involved?
Investment Circle decisions are made independently and FaHCSIA will have no ability to intervene in their processes. However, as part of the evaluation of the pilot, the issue of access to capital for CDFI models, including the reasons Investment Circle members may have declined applications, will be investigated and fed into future policy framework discussions and decisions in the community finance space.
Q: Will the funding provided by the Investment Circle be considered a loan or an injection of capital as a loan can’t be considered as capital?
The nature and terms and conditions of the funding provided by Investment Circle members is a matter for bilateral negotiation between the applicant and the Investment Circle member.
Q: Who is on the Investment Circle?
At this stage, only the four major banks are members of the Investment Circle. While Investment Circle membership is open, to date only the four major banks have expressed interest in being involved. Overseas experience would suggest that the involvement of the banks at this early stage could be a key element to the longer term success of the CDFI model.
If there are other investors who would like to become a part of the Investment Circle they should contact FaHCSIA as soon as possible to discuss their involvement.
Q: What is the criteria for disadvantaged Australians? How are they defined? Are they only assessed in terms of income or also in terms of lack of financial knowledge?
FaHCSIA has not defined disadvantaged Australians for this pilot project. The target group will need to be identified by the applicant as part of their business plan and will depend on the model and the associated products and/or services being provided. It is likely that disadvantaged Australians will be assessed by such considerations as income, financial knowledge, and level of financial exclusion from mainstream products.
Q: If an organisation is seeking loan funding from the Investment Circle, then would they be expected to favour their products over and above their competitors? In other words, would the organisations be able to maintain their independence and provide an unbiased advice irrespective of the loan provider?
It is expected that the applicant will maintain their independence from any capital or loan provider who would not have any influence on the product or services provided by the applicant.
Q: If an organisation intends to seek 100% funding from the Investment circle then would it be viewed unfavourably? Do the organisations have to have their own capital funding arrangements demonstrated in the application?
FaHCSIA will not be assessing applicants on the balance between funding from the Investment Circle and other sources. If the applicant has other sources of capital funding it is expected that these will be included in the application as a part of the business plan. It is not necessary to have other sources of funding if applying for Investment Circle funding.
Q: Are there any current service providers within this project? If yes, then who are they?
There are currently no service providers funded under the CDFI pilot project.
Q: In what format are the participating organisations will be expected to submit their reports as listed in the Schedule? Would the templates be provided by the Government/FAHCSIA?
The reporting requirements are determined during the funding agreement negotiations between FaHCSIA and the successful provider. The reporting requirements will reflect the evaluation framework currently being finalised.