When the public and private sectors, along with non-profits, can leverage their resources and expertise toward a mutual goal of serving communities, we can achieve some great things. To be sure, public-private partnerships can come with certain challenges, and those aimed at economic development have not always produced the expected results in other states. However, there are also innovative examples of mission-driven efforts in which public and private entities have come together to expand economic opportunity to individuals and communities that traditionally face barriers accessing resources. These efforts can serve as examples for how economic development programs can have a wider and more inclusive reach.
Community development financial institutions (CDFIs) are a prime example of a successful public-private partnership. CDFIs are private-sector financial institutions that extend capital and investments in underserved communities. These investments can include small businesses, which is what Carolina Small Business focuses on, affordable housing, and community facilities such as day cares, charter schools, etc. CDFIs can be loan funds, community development banks, credit unions, and venture capital funds.
CDFIs receive certification and funding from the CDFI Fund, which is a part of the US Department of Treasury. It was established in 1994 with the express purpose of spurring community revitalization through these types of investments, meeting a need that was not being served through traditional sources of capital.
Today there are over 1,300 CDFIs across the nation, which in 2016 originated $3.6 billion in loans and investments that financed over 33,000 affordable homes and over 11,000 businesses. In addition to the CDFI Fund CDFIs receive funding from other federal agencies such as the Small Business Administration (SBA), US Department of Agriculture (USDA), Economic Development Administration (EDA) and others. However, these public funds are then leveraged to garner additional investment from private sources, such as banks and foundations. In fact, for every $1 in CDFI Fund assistance, CDFIs generate $12 in additional financing for the communities they serve. In this way, CDFIs are able to leverage their public assistance in order to increase investment in areas that that have been left out of the mainstream economy. The outcomes that CDFIs have achieved provide evidence of the success of this public-private partnership.
On a local level, Carolina Small Business has been a part of a few collaborative efforts to expand access to capital to small businesses. For the LaunchRALEIGH program we partnered with the North Raleigh Rotary Club, Passage Home, Wake Tech/Wells Fargo Center for Entrepreneurship, Shaw University, St. Augustine University, and the City of Raleigh. The purpose was to accelerate entrepreneurship, offer access to capital, and community support to Southeast Raleigh entrepreneurs. In this historically economically challenged community, low-wealth individuals with a business idea face particular challenges starting and growing their ventures.
The LaunchRALEIGH program included a combination of training, mentoring, networking, and access to capital. A cohort of 20 business owners participated in a series of eight workshops, totaling 24 hours of classroom time. Each one was matched with a mentor, offering four hours of mentoring each month for six months. And finally, the business owners who completed the program could apply for a microloan through Carolina Small Business. Eight of the entrepreneurs applied for loans up to $2,500.
Another public-private initiative targeting this community, the Southeast Raleigh Innovation Challenge, will be culminating on October 20th with a pitch competition. This challenge is a partnership between Carolina Small Business, United Way of the Greater Triangle, Wake County, the City of Raleigh, and Southeast Raleigh Promise. The purpose is to spur ideas from within the community itself that can help build social and economic vitality for the community. Selected participants participated in a 6-week training and coaching program to develop their ideas. Next Friday, the participants will pitch their ideas to a panel of judges for the chance to win funding out of a $120,000 prize pool.
These are just some examples of innovative approaches to fostering economic development in underserved communities. The CDFI Fund shows that federal funding can provide a catalyst for increased investment toward economic revitalization of communities. LaunchRALEIGH and the Innovation Challenge show that committed local partners can combine resources and expertise toward a greater impact within communities.