Income inequality has emerged as one of the top economic development issues in the United States since the Great Recession. CDFIs that support job creation can help bridge this income gap by working with businesses to create “quality jobs”—or those that offer fair wages, good benefits, meaningful advancement, and wealth-building opportunities.
Today, there are just a few CDFI small business lenders focused on this critical issue. OFN interviewed five of them, along with five of their borrowers, to gain an understanding of the practical approaches and tools they use to promote quality job creation.
Our newest publication, Reducing Income Inequality: How CDFIs Promote Job Quality, shares our learnings, provides examples of tools used by these leading CDFIs, and provides recommendations for expanding this work.
The ultimate goal is to help more CDFIs engage in promoting quality jobs. And we’re not alone in this goal. As the report states: "Some of the CDFIs on the cutting edge of quality job creation hope to inspire other CDFIs. They want the CDFI industry to raise the bar from creating any job to creating quality jobs that will help lower-income individuals thrive in their communities."
The five CDFIs in the study employ a wide range of financing and development services to help business owners create quality jobs. Their tools include debt and equity products, interest rate reductions as incentives, technical assistance, and in-depth advisory services to help small business owners improve job quality, mentoring, and accelerators.
These CDFIs face challenges that include building a sufficient pipeline of qualified businesses, high costs of providing quality jobs development services, difficulties in collecting and analyzing impact data, and access to funding.
The paper outlines six recommendations to help advance the breadth and impact of quality job promotion efforts in the CDFI industry. Recommendations include creating more awareness of how small businesses benefit when they provide quality jobs; identifying which development services interventions have the greatest impact on quality job creation; finding ways to make these services more cost effective to deliver; and encouraging funders to fully support this work. Read the full report here.