A Qualitative Model for the Evaluation of Community Development Financial Institutions

Author(s): Caroline Smith Loyas, Impact Seven, Inc.

This paper addresses a gap in evaluation research of Community Development Financial Institutions (CDFIs) in the United States and models a qualitative interview process that CDFIs can employ to develop a better understanding of how their lending affects borrowers and communities. The CDFI industry was established to deliver capital and technical assistance to borrowers, projects and communities that lack access to credit due to historic structural inequities and uneven development patterns. CDFIs represent a broad array of institution types, providing financial products and services in a diverse set of asset classes in communities throughout the United States, with markets defined in terms of geography or population characteristics. The complexity of the CDFI industry thus precludes a standardized approach to evaluation of its social outcomes and impacts. The model presented focuses on the small business lending activities of Impact Seven, a statewide CDFI. Through conducting one-on-one interviews of borrowers and analyzing responses for recurring themes, CDFIs will develop a nuanced understanding of the ways in which their lending activities affect small business borrowers and the communities in which they work. Qualitative analysis can additionally serve to identify quantitative outcome and impact metrics for further study.