10.46712/cdfi.evaluation.pressures

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 de-prioritize 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.