We live in a time of unprecedented innovation and wealth creation. Yet, that growth and prosperity has not been broadly shared. For the vast majority of Americans, economic mobility is declining and the prospect of achieving the American Dream is eroding. These challenges are compounded by the steady divestment in the public workforce system—since 2000, U.S. federal funding for workforce development has decreased by 35 percent—and a skills mismatch that has led to seven million unfilled jobs. While there are a growing number of accelerated training models that provide skills building for in-demand jobs, low-income individuals are often unable to access them due to an inability to finance the upfront training costs, perpetuating a cycle that keeps a significant population underskilled and underemployed.
Social Finance is committed to addressing the dual challenges of declining economic mobility and the growing skills gap. We’ve pioneered a new Pay for Success strategy – the Career Impact Bond (CIB)– to help navigate these access barriers and connect individuals with in-demand jobs. The CIB is a form of an income share agreement with a distinct focus on improving access to high-quality, industry-recognized training programs for low-income populations.
In a CIB, funders cover upfront program costs, which students repay as a fixed percent of their income over a set time period, once they gain meaningful employment. Unlike loans, CIBs link student payment to actual earnings through a set of student-friendly terms that provide down-side protection and are time- and dollar-capped.
Social Finance structures CIBs that are impact-first, cost-effective, and fair, and we focus on programs that provide lasting economic benefits to participants. Our first CIB, launching early 2019, will provide funding that enables low-income individuals to attend a best-in-class coding bootcamp.