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How CDFIs are Shaped by Funders through Data Collection, Impact Measurement, and Evaluation

Conference Paper in Collaboration with the University of North Carolina at Chapel Hill, the University of Illinois at Urbana-Champaign, and CNote


ABSTRACT

Community Development Financial Institutions (CDFIs) are grassroots organizations that provide equitable access to financial capital. While a robust body of evidence supports the ability of CDFIs to promote holistic and sustainable development, attempts to systematically evaluate the industry have yielded disparate and often confounding results. We apply an institutional theory lens to examine challenges to meaningful data collection, impact measurement, and program evaluation. Our data show how regulators, major funders, and third-party rating organizations have applied indirect and direct pressures that have systematically lowered the capacity of nonprofit CDFI loan funds. This combination of coercive, mimetic, and normative isomorphic forces has (1) hampered meaningful data collection, (2) created a lack of staff expertise in these areas, (3) raised the cost and complexity of utilizing technology systems to improve evaluation processes, and (4) fostered industry norms which deprioritize meaningful evaluation. The data suggest several ways for stakeholders to improve these trends. For example, funders might consider providing support which builds organizational capacity via unrestricted operating grants and recurring financial commitments.

WHY THIS MATTERS

If CDFIs are to be effective in their efforts to help people and places forgotten by traditional institutions, they must build financial and non-financial capacity. In practice, this requires the sector pull resources from a dizzying array of governments, foundations, corporate philanthropy, and social impact investors. Each of these stakeholders has a different set of requirements in terms of return-on-investment, financial performance benchmarks, compliance reporting, and impact measurement. This research is the first attempt to provide evidence for how these varying requirements result in cycles of capacity diminishment.


DOWNLOAD THE SLIDES AND THE CONFERENCE PAPER:


Slides-CDFI-Evaluation-Pressures
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Paper-CDFI-Evaluation-Pressures
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SUGGESTED CITATIONS:


Williams, Teshanee, McCall, Jamie, Prochaska, Natalie, and Tamra Thetford. 2022. “How Community Development Financial Institutions (CDFIs) are shaped by Funders through Data Collection, Impact Measurement, and Evaluation.” Presentation at the 51st annual meeting of the Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA), Raleigh, NC, November 18. doi: 10.46712/cdfi.evaluation.pressures.


Williams, Teshanee, McCall, Jamie, Prochaska, Natalie, and Tamra Thetford. 2022. “How Community Development Financial Institutions (CDFIs) are shaped by Funders through Data Collection, Impact Measurement, and Evaluation.” Paper presented at the 51st annual meeting of the Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA), Raleigh, NC, November 18. doi: 10.46712/cdfi.evaluation.pressures.

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