From the Federal Reserve Bank of Atlanta:
Current sources of workforce development funding are not sufficient to meet the needs of workers and employers. Additionally, the systems in place to distribute these funds struggle to meet the demand of their clients. As the workforce development system is moving to create lasting impact, stakeholders should consider the important role that community development financial institutions (CDFIs) can play as a source of workforce development financing for training and education partners.
Based on three case studies selected to highlight how CDFIs can play a variety of roles in transactions, this paper offers innovations that increase workers’ access to and the affordability of credit, training, and services.
- A local credit union offers a more affordable student loan alternative through a small-dollar loan product to individual job seekers needing in-demand credentials.
- A national CDFI helped a community college use the New Markets Tax Credit program to accelerate investment in facilities required for a new culinary arts education program.
- A group of CDFIs financed a working capital loan to help a nonprofit staffing firm focused on housing-insecure or formerly incarcerated workers expand into a new market.
Understanding different ways that CDFIs can finance workforce development can help address the longstanding trend of dwindling federal workforce development funding and funding gaps that have persisted for training and education, especially outside of postsecondary education. CDFIs can develop strategies tailored to financing workforce development through lending and other financing activities by reimagining existing expertise in product design and custom underwriting by attracting diversified financing partners. Workforce development practitioners can build relationships with CDFIs that work in their communities and learn more about how to obtain a CDFI loan, especially from CDFIs that offer borrowers technical assistance. Successful partnerships between CDFIs and workforce training providers are critical to scaling CDFIs financing workforce development.
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