Read time: 4 minutes
A new paper from OFN, Deloitte, and Raza Development Fund establishes five research priorities for CDFI stakeholders to support industry growth and mission impact.
For decades, CDFIs have invested in rural, urban, and Native communities. As lenders with a mission to provide capital to communities underserved by mainstream finance, CDFI investments help create jobs, develop affordable, energy-efficient housing, and build thriving communities.
The public and private sectors have long recognized these mission lenders as a vital and core part of the financial ecosystem. And the industry’s visibility grew significantly as CDFIs helped communities withstand and recover from the pandemic’s economic impact.
This increased awareness brought an infusion of capital and new types of funders and investors to the industry. It has also underscored a need for high-quality empirical research on the CDFI model and its impact.
To build knowledge about CDFIs, Deloitte, OFN, and Raza Development Fund have published a new brief establishing priority research areas for CDFIs and industry stakeholders, including CDFI clients, government, impact investors, and applied research institutions: Five research priorities for community development financial institutions: Advancing financial inclusion through evidence-based practice.”
They also present the research call to action in a shorter summary paper — The many paths to a more inclusive financial system: The value of community development financial institutions — for a quicker, broader read and for readers less familiar with the industry.
“While CDFIs are as unique as the communities they serve, as mission lenders they share a common understanding about the industry’s purpose: to empower individuals and communities by meeting them where they are, when needs are significant, and resources are low,” said Adrienne Smith, OFN’s senior vice president of research. “But, while the vision of a more inclusive financial system is the same, CDFIs and industry stakeholders may differ on how to best track progress and impact on individuals and communities—as well as industrywide.”
Priority research areas
The brief — Five research priorities for community development financial institutions: Advancing financial inclusion through evidence-based practice — details the following areas:
- Identify primary operational strategies and tools.
- Outline historical lessons and current trends.
- Standardize impact measurement and evaluation processes.
- Encourage funding that bolsters capacity and sustainability.
- Improve the industry’s data quality and scope of coverage.
The authors maintain the five areas are a starting point for financial inclusion research that will help CDFIs highlight progress, identify challenges, and ultimately achieve their goals.
More than ‘nice to have’
OFN, Deloitte, and Raza presented the research brief and the importance of measurement frameworks at the 2023 OFN Annual Conference in October. During a standing-room-only session, panelists observed that the industry has reached a level of maturity that calls for standardization in data collection, research, and evaluation around a shared research agenda.
Data is an invaluable resource for tracking and understanding the efficacy of CDFIs and the sustainability of their activities. While CDFIs are all at different stages of their research and evaluation journeys — some tracking outputs for compliance and others examining outcomes for deeper learning and understanding — many CDFI stakeholders, especially practitioners, agree that research and evaluation are critical to the work in the future.
“We understand that research is an inherently privileged activity requiring significant resources,” said Smith. “And, at the same time, it is also a valuable investment in a more inclusive economic system.”
More and more CDFIs of different sizes and sectors are acknowledging that the industry needs a stronger research capacity and infrastructure. Research and evaluation are no longer seen as a ‘nice to have’ but as a ‘have to have.’ The proposed five priority areas are designed to help internal and external stakeholders better measure and understand how CDFIs contribute to the nation’s financial ecosystem.
Read the papers
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