Growth, Equity, and Individual Welfare: A Theoretical Framework for “Moving the Needle” on CDFI Impact Evaluation

Abstract

Community development financial institutions (CDFI) are grassroots entities that guide sustainable economic growth by prioritizing the needs of marginalized populations. Traditionally, CDFIs have been evaluated by the extent to which their activities foster local development or lessen economic inequities. Our analysis suggests this phenomenon is the result of deeply entrenched alliances between the public sector and the interests of CDFI stakeholders. These institutions are major resource providers and thus have set the narrative around CDFI impact measurement and evaluation. We propose an alternative framework that prioritizes changes in individual welfare which foster economic autonomy and improve relationships with community institutions. Our framework is admittedly theoretical, and further iteration will be required to operationalize it into a workable concept. Ultimately though, the existing framework around these issues is broken – and we find scant evidence that it can be salvaged.