Key findings from the 2023 CDFI survey from Federal Reserve

What the 2023 CDFI Survey Says About CDFI Output and Outcome Tracking 

Read time: 6 minutes

Community development financial institutions (CDFIs) invest in rural, urban, and Native communities that mainstream finance perceive as too risky.  

For decades, the mission lenders have proven to be specialized and efficacious investors that drive economic opportunity. The communities CDFIs serve see the evidence, even if formalized measurement isn’t yet capturing all the outcomes of CDFI lending.   

As the CDFI industry grows, so does the desire among CDFI stakeholders — funders, investors, partners, and lenders — for CDFIs to demonstrate the effectiveness of their programs through impact measurement and management (IMM) and program evaluation.  

But measurement and evaluation are easier said than done. Nationwide, CDFIs are at different stages of developing IMM and program evaluation practices, and many need additional information and resources to determine the leading practices for measuring outputs and outcomes. The Federal Reserve’s CDFI Survey, fielded nationally since 2019, is one such asset. It seeks to learn more about how CDFIs are faring and evolving.  

The 2023 CDFI Survey examined CDFI perspectives on tracking output and outcome metrics, helping to demonstrate where CDFIs are and where they want to go with IMM and program evaluation.  

The Fed and its survey partners, including OFN and other CDFI associations and intermediaries, gathered information from 453 respondents, from mainly three types of CDFIs: loan funds (48%), credit unions and cooperatives (35%), and banks, including bank holding companies (12%).  

CDFI Survey Findings on Output and Outcome Tracking 

In a new brief, Richmond Fed analyst Surekha Carpenter and OFN’s Senior Vice President of Research Adrienne Smith dig into some of the survey’s findings on how and why CDFIs measure outputs and outcomes.  

(Outputs are the direct products of CDFI lending, grant-making, and development services, and outcomes are short- and long-term changes to clients, customers, and communities that occurred because of CDFI activities.)  

Published on Fed Communities in April, the brief aims to understand what output and outcome metrics CDFIs measure and want to measure, why CDFIs track metrics, and what challenges they face in tracking metrics. 

Insights about Outputs and Outcomes: What the Brief Tells Us

 The authors present three key findings related to measurement and evaluation: 

  • Outputs are easier to measure; outcome data are more desirable. CDFIs are interested in measuring the mid- and long-term outcomes, including financial performance of clients, jobs created, and quality of these jobs. Outputs, such as number of clients or customers, loan dollar amounts, and client demographics, are easier to collect.  
    For example, 61% to 82% of respondents indicated an interest in tracking mid- or long-term outcomes, but only 38% to 52% were doing so at the time of the survey.    

  • CDFIs track metrics for various reasons, which differ by CDFI type and capacity. The purpose of metric tracking includes attracting and retaining funding and capitalization and informing organizational learning and decision-making. Some CDFIs track for overlapping reasons — for example, the same lender may track a particular metric because a funder requires it and because the metric will support organizational learning and decision-making.  
    CDFIs were first asked to select all reasons why they track metrics. Overall, larger shares of respondents gather metrics to inform their staff, management, and board (88%) and track product success (82%). Somewhat smaller shares track to satisfy funder requirements (78%) and attract new funding (74%).   
    At the same time, the top reasons for tracking metrics differ by institution type and organizational capacity. For example, 30% of loan funds chose “satisfy funder requirements” as their top reason for tracking metrics, whereas 25% of banks and 17% of credit unions selected that reason. 

  • CDFIs face several similar challenges in metric tracking. The CDFI Survey asked respondents what factors impede their ability to track output and outcome metrics. The top challenges in tracking include resource and capacity constraints and data collection and measurement issues. With regards to capacity constraints, 22% of respondents cite a lack of staff time to collect data; 13% indicate it’s too costly to collect data. With regards to data collection and measurement, 21% of CDFIs find it difficult to collect client data after products close; 17% find that clients and customers are reluctant to share data. 
    Challenges in tracking vary according to institution types and organizational capacities. For example, 25% of loan funds and 27% of banks said staff time is a top concern, whereas 16% of credit unions have the same top concern.  

Investing in Measurement: The Brief’s Key Takeaways 

As a resource, the 2023 CDFI survey offers a window into the CDFI ecosystem, enabling all stakeholders to better understand the industry’s challenges and opportunities. Regarding metric tracking, the brief’s authors have three key takeaways from their analysis of the 2023 survey’s findings. 

  • Outcome tracking is resource-, capacity-, and time-intensive. Dedicated investment is needed. CDFIs need financial support and increased capacity to transition from outputs to outcomes tracking. The transition is challenging and costly, but it will pay dividends in understanding the effectiveness of CDFI activities and increasing public awareness of the industry’s mission impact. 

  • CDFIs and industry stakeholders must address tensions between outputs-focused reporting requirements and each CDFI’s ability to track progress and understand mission impact. For some time, the CDFI industry has wrestled with the tension between developing industry-level standards and definitions and providing space for each CDFI’s unique mission, strategy, and local context. Ideally, the industry should have the intellectual space and resources to do both. 

  • Funders, investors, and industry stakeholders should invest in capacity building to encourage growth and increase impact — particularly among smaller, capacity-constrained CDFIs. Data reporting requirements should not overburden smaller and emerging CDFIs. Instead, they should be encouraged and supported in developing frameworks that measure how their work effects change in communities and in aligning metric tracking with these frameworks. Industry stakeholders can support smaller CDFIs through capacity-building tools, training, funding, and other

What’s Next 

As the CDFI industry continues to grow, OFN, regional Federal Reserve Banks, and other CDFI researchers will continue to study how, why, and where CDFIs demonstrate impact.  

“Together, we’re contributing knowledge about the power of CDFIs,” said Smith. “The Richmond Fed’s partnership with OFN and others involved in the CDFI Survey and this brief are building on the tremendous work that has and continues to be done by other researchers. This research helps to demonstrate how CDFIs are a critical part of the financial inclusion infrastructure nationwide.”

Ultimately, all CDFI-focused research aims to support industry growth and effectiveness, allowing CDFIs to achieve their mission of moving capital to underinvested people and places. 

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