CDFIs & Financial Literacy
According to Federal Reserve Chairman Ben Bernanke, “Consumers with the necessary skills to make informed financial decisions about purchasing a home, financing an education or their retirement, or starting a business will almost certainly be economically better off than those lacking those vital skills.” Community development financial institutions (CDFIs) help low-income people obtain those necessary skills by providing training, technical assistance, and other financial literacy programs and services.
The type and amount of training and technical assistance a CDFI offers depends on the needs in its market and whether those needs include packaging funding for an affordable housing developer, business plan training for an entrepreneur, or credit counseling for an individual. In fiscal year 2005, CDFIs provided approximately 9,600 organizations and more than 181,000 individuals with group-based training and one-on-one technical assistance.
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Not all “financial education” is explicitly packaged as such. Consumers and future consumers of financial products are educated in many ways other than through clearly defined “financial literacy” programs. For example, CDFIs often refer to this type of education as technical assistance.
According to a 2002 Federal Reserve Board report, “In an ideal world, financial educators would analyze each individual’s needs and provide customized training based on that assessment. But such one-on-one interaction is time- and resource-intensive.” CDFIs often provide that type of individualized training and counseling as part of a loan because it is the most effective way to educate people about the importance of their financial decisions.
This is an excerpt from The NEXT American Opportunity. The full text can be downloaded as an Adobe PDF Document.
