Charities are struggling because of low interest rates

CAF Bank, the not-for-profit bank run for charities, has published the results of a survey of 280 charities that reveals 42 per cent of charities are struggling to deliver services because of low interest rates.

The survey also shows that low interest rates are forcing almost half (45 per cent) of charities to dip into their savings or reserves to deliver essential services which is further weakening the finances of charities who are already facing fundraising pressures.

CAF Bank is a wholly owned subsidiary of the Charities Aid Foundation and a leading provider of banking services to charities. It has over 15,000 customers and a market share of eight per cent.

Commenting on the survey's findings Peter Mitchell, Chief Executive of CAF Bank said: "Interest rates have plummeted as the Bank of England has waged war on recession and the plight of savers and pensioners has been well documented. Our survey reveals that charities are the latest innocent victims of the financial crisis and the vital services they deliver are being impacted by historically low interest rates."

Alongside the impact of low interest rates the survey shows that almost a fifth of charities (17 per cent) have said their high street bank has increased charges since the financial crisis began. Bank charges are an important consideration for charities because additional research undertaken by CAF Bank reveals that a typical small or medium sized charity would need to earn at least 3.24 per cent interest to offset a typical high street banks annual charges.

The survey into charities' attitudes to banking since the financial crisis also found that while the majority of charities accept that the Government's bail out of the high street banks was necessary (68 per cent), less than half (45 per cent) feel that their money is safer because of action taken by the Government.

Peter Mitchell added: "In a low interest rate environment I believe that charities should consider whether the best value comes from time spent chasing nominal rates of interest or from seeking a bank that doesn't impose high charges."

Charities can bank for free with CAF Bank. As a not-for-profit organisation any surplus CAF Bank generates is donated back to CAF. It is estimated that in the last year the benefit of CAF Bank's approach of paying competitive rates of interest combined with low charges was worth over £20m to the charity sector.