Partnerships between Community Development Financial Institutions and Workforce Development Organizations
July 12, 2022
Summary
Inability to secure capital to improve worker skills or expand training programs can prevent growth in a local economy. This paper presents the role CDFIs can play to fill a need for financing in the workforce development sector. While the transactions presented in this paper are unique, they highlight the importance of partnerships between the two industries. Shared missions and an overlapping client base between CDFIs and workforce development practitioners creates a natural pairing for collaboration. In addition, CDFIs are uniquely able to serve as test beds for innovation because of their different method of underwriting deals and higher financial risk tolerances compared to traditional financiers. The authors present case studies involving small-dollar personal loans to finance skill development, new market tax credit transactions to expand educational facilities, and business acquisition and working capital loans to support nonprofit workforce developers.
View PaperDiscussion Paper 2022-1
JEL Classification: G29, J240
Key words: community development financial institutions, CDFI, workforce development, workforce funding, workforce training, education, loans, financial innovation, workforce finance, community colleges
Digital Object Identifier (DOI): https://doi.org/10.29338/dp2022-01
Special thanks to Sameera Fazili, Ann Carpenter, Stuart Andreason, Chris Cunningham, and Charlene Van Dijk for their excellent feedback and helpful comments. Additional thanks to Peter Beard and Molly Bashay for their comments and review. We also thank Freedom First Credit Union, LISC Indianapolis, and Nonprofit Finance Fund for their time through interviews and feedback on their respective projects. The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.