The government has announced that it is to provide £1.2m for a project aimed at moving the Ulster Defence Association away from violence and crime.
Thorny issue of UDA weapons was not mentioned in announcement
BBC Northern Ireland home affairs correspondent Vincent Kearney says the funding will run for three years in six loyalist areas.
Six months ago, Peter Hain announced that the government was giving £135,000 to a project aimed at moving the UDA away from paramilitary activity and crime.
But the secretary of state did not stop there.
He also dangled a huge carrot, making it clear that a larger sum could be available if there was clear evidence of a genuine attempt by the UDA leadership and its political representatives, the Ulster Political Research Group, to transform the organisation.
The UPRG has clearly convinced the government that it is serious.
The group spent the past six months talking to its grassroots membership, with about 4,000 active UDA members attending a series of meetings throughout Northern Ireland.
There have also been continuing behind the scenes talks with Northern Ireland Office officials.
It then submitted a detailed business plan asking the government to fund a Conflict Transformation Initiative, which it says will result in a different UDA - an organisation no longer involved in terrorism or crime, and encouraging and helping its members to seek education and jobs.
The government says the funding is conditional
That ambitious statement will be greeted with a huge dose of cynicism by many, given the UDA's persistent involvement in crime, something that has been highlighted in successive reports by the Independent Monitoring Commission.
But recent reports by the IMC have also acknowledged "positive efforts" by the UDA leadership to end those activities and the government believes that the provision of £1.2m over the next three years is a price worth paying if that move can be reinforced and accelerated.
Announcing the funding, Social Development Minister David Hanson said it is hoped the project "will deliver a quickening in the pace of the work of the UPRG in their conflict transformation work".
'Retention of weapons'
The government hopes that work will eventually lead to a major prize - the effective end of the UDA as a paramilitary organisation, with its members forming a kind of 'old boys' society'.
The thorny issue of weapons was not mentioned in the government's announcement.
The government learnt from its dealings with the IRA that setting deadlines for decommissioning has little effect.
IMC have also acknowledged "positive efforts" by the UDA
The hope is that, if the UDA does transform into a non paramilitary organisation, it will find it impossible to defend the retention of weapons.
Loyalist sources say decommissioning is not yet on the agenda, but do not rule it out.
"Like Sinn Fein did, we have to decommission the mindsets first," says one.
"We have to show people that there is another way, that they are not being isolated, that their voices are being listened to.
"People have to accept that there is no place for violence of any kind before the issue of weapons can be addressed."
The project will be administered by Farset Community Enterprises, based in north and west Belfast.
It will be responsible for recruiting up to a dozen staff and opening offices in the designated areas.
The UDA is divided into six so-called brigades, and the projects will be divided into similar geographic areas.
The government says the funding is conditional.
It will be provided in three stages of £400,000 in each of the three years and the UPRG has been told that the funding will only continue if there is clear evidence of a reduction in UDA violence and crime.