Community development financial institutions (CDFIs), which play an important role in providing financial products and services to underserved communities, are increasingly being asked to demonstrate measurable returns. This demand for quantifiable impact is not unique to the CDFI industry. As public and private resources become increasingly scarce, it is a challenge they share with many other sectors. In response, both CDFIs and their investors have expressed increased interest in measuring social impact. In other words, how were people’s lives improved as a result of a particular community development effort?
This article by Ela Rausch of the Federal Reserve Bank of Minneapolis in the Spring 2012 issue of Community Investments identifies some of the primary challenges that CDFIs face when it comes to measuring these non-financial returns. It demonstrates how the use of a logic model, a tool used by evaluators, can help CDFIs effectively communicate their role as catalysts for improving social outcomes in underserved communities.