Will There be Capital for Inclusive Economic Development in a Recession?
April 14, 2020
In our third roundtable in the Inclusive Economic Recovery Roundtable Series, we focused on the investment capital required to deliver an inclusive economic recovery. We discussed whether there will be sufficient financial resources, whether the capital will be intentional and focus on the communities hardest hit by the pandemic and the roles of different stakeholders—investors, donors, government and private sector. Key themes of our discussion were:
- Reliance on Mainstream Capital Systems Leads to Inequitable Allocation: The small business funding in CARES was impressive, however, it was immediately evident that many could not access these provisions. “The majority of that money is just not going to reach low-income businesses.” Presenters talked about the need to have more diversity in the actors deploying capital, and the need to prioritize more community financial organizations. “You are not going to get broadly shared relief and resilience until you broaden the systems being used.”
- Need for Investments at Scale – The CDFIs were proposed as the likely intermediaries of choice to place capital more equitably, but it will depend on their ability to scale. Presenters talked about how CDFIs could attract sizeable business investment capital and broaden the financial products offered. Technology solutions were also highlighted as ways to extend outreach to low- and middle- income communities.
- Capital to Support Workforce Development – A lot of the headlines has focused on making capital available to small businesses, however workforce investments are equally urgent right now. Even in good economic times, we have a broken system of getting workers prepared for good quality jobs with economic mobility. “We don’t have a system that works and the folks most hurt by this are the individuals living in low and mid-wealth communities.”
- Private Sector is more Visible than in Past Recoveries – The government made the headlines with the size and expediency of its relief package. But corporate and philanthropic partners have also been quick to step up and make bold public commitments for relief. There was some concern from the panelists, however, that the funding may dry up after the short-term response and that there will be inadequate funding available for the medium and long-term recovery.