2013 FIR Summary

During the past 13 years, the Financial Innovations Roundtable (FIR), part of the Carsey Institute at the University of New Hampshire, has worked with a range of community development and financial institutions, government agencies, foundations, and trade associations to improve access to capital. It does this by tapping the expertise of thought leaders from the institutional investment, banking, philanthropic, and community development industries.

This report summarizes the key points raised in the April 2013 roundtable, and offers strategic next steps to take, including developing common definitions for community development-related social impact.

The 2013 roundtable looked at two specific stakeholder groups: investors in community development financial institutions (CDFIs) and CDFI lenders. The CDFI sector has grown rapidly since the mid-1990s, with approximately 1,000 CDFIs across the country today. Evaluations of their operations, including our own, have generally painted a positive picture of the sector. Yet questions remain. Insufficient data and quality—in part because of the relative newness of the sector—pose particular problems.

More fundamentally, two closely connected issues remain unsolved: (1) current ways of measuring CDFI performance are not guided by a coherent theoretical rationale; and (2) public bodies and private investors therefore have no proper guidelines to direct funds into the sector. There is no single set of performance measures that can be applied to the sector as a whole. Instead, the field must develop a performance measurement framework that can be used as a tool to monitor the individual stakeholder relationships of each CDFI.

Measuring impact or performance is a complicated endeavor because communities are complex systems. They consist of many interrelated structures and activities that, along with external factors, influence the very conditions any community or economic development program, including CDFIs, seeks to affect. It is also the case that most CDFI investments are small relative to both the size and need of the neighborhoods or communities they target. As a result, it is often unrealistic to expect to measure investment or project impacts, such a poverty levels or property values. Thus, identifying outcomes, determining whether benefits flow to those with greater needs, and sorting out (both short-term and long-term) causes and effects are difficult tasks.

Program-specific evaluation challenges exist as well. For example, the fact that the program provides funds to CDFIs that serve specific communities as well as low-income individuals, whether or not they live in a poor community, means that evaluations must measure the benefit to people as well as places. In addition, individual CDFIs make investment decisions so evaluators must consider as legitimate multiple conceptions of need and impact, as articulated by different CDFIs. Finally, the fact that the program can be used to support a wide array of project or asset types—from housing to financial counseling—means that there is no single outcome metric that applies to all projects.