CAF Bank has said it plans to lend up to £75m to the charity and social enterprise sector over the next three years.

The bank is a specialist deposit-taker for charity bank accounts, and holds around £1bn of charitable assets belonging to around 16,500 charities. Historically it has not lent money out to the sector, but placed it on deposit with other banks.

The bank is a wholly-owned subsidiary of the Charities Aid Foundation and gift aids up about £2.5m in profits each year.

Peter Ostacchini, chief executive of CAF Bank, told Civil Society News the bank had decided to start lending because there was an obvious need for finance in the charity sector, and that lending was “a natural progression of the business model”.

The bank has been lending since late 2012, and has lent £29m so far, including one commitment of £5m. It will offer loans of between £50,000 and £5m over up to 25 years.

Ostacchini said most lending was secured against assets, or was to fund increased service delivery.

“We’re seeing charities selling their services more,” he said. “There’s more need for this kind of lending.”

He said the bank had to be competitive on price, but it offered advantages because it understood the sector, was a patient lender to charities, and because any money charities paid back went to a sector body.