CDFIs: Outcomes, Impact & How to Track Them


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Introducing a framework for Community Development Financial Institutions to discover and calculate Social Return on Investment (SROI). Connect program outcomes to societal contributions and savings.

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CDFIs: Outcomes, Impact & How to Track Them

  1. 1. Outcomes, Impact & How to Track Them By Lawson F. Knight, iiCredit Wind River Development Fund
  2. 2. Goals •  Introductions •  Background of Social Return on Investment (SROI) •  Linking SROI and Program Evaluation •  Model CDFI SROI •  Developing SROI for your CDFI •  Getting to a defensible result •  Your next steps
  3. 3. About Us Wind  River  Development  Fund  is  a  private,   nonprofit  community  development  corpora4on   and  federally  cer4fied  Community   Development  Financial  Ins4tu4on  that  seeks  to   s4mulate  economic  development  on  and  near   the  Wind  River  Indian  Reserva4on.   iiCredit  is  a  cloud-­‐based  CDFI  opera4ng  system  built  on  the  platorm.  Built  as  an  earned-­‐income  strategy  of  Wind   River  Development  Fund  (WRDF).  WRDF  is  iiCredit's  first  user.  The   applica4on  was  built  with  the  prac4cal  goal  of  moving  the  en4re   Enterprise  Stack,  from  data-­‐storage  to  e-­‐mail,  to  the  cloud.  
  4. 4. CDFI Service Delivery Model Par4cipant   Recruitment   &  Intake   Life  &   Financial  Skills   Development   • One-­‐on-­‐One  Assistance   • Workshops  &  Training   Capital  Access   • Lending  Capital   • Asset  Building   (Matching  Funds)   Stability,   Reten4on  &   Community   and  personal   growth   • Less  Poverty   • More  Prosperity  
  5. 5. ROI •  Return on Investment. What does that mean? •  How much do I get back for what I spent? •  For Instance: –  My CDFI lends $10,000 for 60 months to a local business at 8% •  Financial benefit? •  Investment? –  For every $100 invested in this business, my CDFI receives nearly a $22 return. Financial Benefit Cost of Investment ROI =
  6. 6. •  Why ROI is insufficient for CDFIs •  What are CDFI topline outcomes? Social Return on Investment Topline   Outcome   Client  Changes   Societal  Changes   Improved   Financial   Capabili4es   Capital   More  income  taxes   More  sales  tax   Self-­‐   sufficiency   Fewer  people  reliant   on  public  benefits   Capacity   Less  likely  to   return  to  old   habits   Fewer  people:   Usurious  financial   instruments     CONTRIBUTIONS   SAVINGS  
  7. 7. SROI •  Translate ROI to SROI: •  Clearly state your assumptions •  Use and document research to cite your analysis Financial Benefit Cost of Investment SROI = SOCIAL Societal Contributions + Savings Cost of Investment =
  8. 8. A primer on SROI •  SROI was first developed in 1997 by Roberts Enterprise Development Fund (REDF) to analyze the impact of seven nonprofit organizations in San Francisco •  These nonprofit organizations were running 23 social purpose enterprises—a proving ground for business/ financial concept like ROI to be adapted as a program tool •  SROI grew from there: –  Methodology paper released in 2001 –  Framework document launched in 2005 –  Guide to SROI analysis published in 2006 –  DIY Guide released in 2007 –  SROI Network formed in 2008 –  Since then, affiliated SROI Networks in Japan, Sweden, Australia, the Netherlands, and the UK. SROI guides published in French, Korean, and Chinese.
  9. 9. What is program evaluation? •  Program evaluation is gathering information about (some aspect of) a program in order to make necessary decisions about the program. •  There’s lots of kinds of evaluation: – Needs Assessment – Process evaluation •  Pareto Principle
  10. 10. Why is it helpful? •  Helps you understand the impact of your work •  Validates what we’re doing & how we’re doing •  Provides evidence for public, promotion, funders and duplication
  11. 11. CDFI Sample SROI What values does a CDFI create for Society? Social Impact: Annualized Contributions to Society $ Income Taxes Paid, Social Security, Sales Tax Dollars Spent Annualized Savings to Society + $ Total One-Year Social Impact $ Determining the Social Return on Investment: Present Value of Social Investments (Over Five Years) $ CDFI One-year Program Cost / $ Social Return on Investment %
  12. 12. Sample CDFI Title Slide Societal Contributions
  13. 13. Annualized Contributions to Society Topline Outcome: # of quality, permanent employment jobs created Total Annualized Income        Job  #1  Wages  and  Benefits   +    Job  #2  Wages  and  Benefits   +  Job  #3  Wages  and  Benefits   +  .  .  .  All  jobs  created   ________________________   TOTAL  INCOME   2014 Income Tax Rates Income Tax Contributions Federal    15.0%   +  Social  Security  6.2%   21.2%   TOTAL  INCOME     x  21.2%   Societal  Contribu4on  
  14. 14. Sample CDFI Title Slide Societal Savings
  15. 15. Annualized Savings to Society Topline Outcome: XX working in quality, permanent employment in 2014 •  Y were receiving Food Stamps at program entry Total Annualized Food Stamps Payouts $252 avg per month x 12 months per year x Y recipients $ Food Stamps savings •  Temporary Assistance to Needy Families (TANF) and Unemployment savings are calculated in the same way –  Based on real data collected during program intake –  Knowledge that payouts stop when individual is on the job
  16. 16. Understanding Outcome Estimation (EITC participation in WY) =Income due to intervention" Your topline outcome group" Research expected rate of participation (7 of 10, 70%)" Calculate your org’s rate of participation" (9 of 10, 90%)" Take the difference (2), and research/calculate cost of participation per person" x Proceeds from " participation"
  17. 17. The Final Calculation •  1 = One Year Program Cost •  2 = Contributions to Society + Savings to Society –  Take one-year results and project out for as many years your enterprise is comfortable. –  Three to five years is typical due to uncertainty beyond. Five years is typical for startup financial projections. –  For each year the projection extends, discount the social benefit to account for inflation and risk. •  30-year bond rate or CPI •  Risk factor is an internal, defensible election like 5% (or more) SROI = Social Financial Benefit2 Investment1
  18. 18. Where do you go from here 1.  Do your quick wins first. 2.  Be as much of a “Data Geek” as you like. Go as far as your interest, resources and ability to sustain assessment over time. 3.  This can be heady stuff. Make it thoughtful, defensible and approachable. Don’t be arrogant. 4.  Be informed and humble. 5.  Move the conversation from grants to investment.
  19. 19. Grow in your capacity Level  1   Level  2   Level  3   Level  4   Enterprise   Social  Outcome   Measurement   Neither  inputs/ ac4vi4es  or   social  impact  of   enterprise  are   measured   Enterprise's   social  inputs   and  ac4vi4es   measured  (e.g.   #  of  employees;   #  of  trainings   held);  data   collected  ad  hoc   from  various   sources   In  addi4on  to   inputs  and   ac4vi4es,  social   outputs   measured  (e.g.   income  or   housing  status   of  employees);     some  data   collec4on   systems  exist   but  not   necessarily   coordinated;   data  some4mes   used  to  refine   enterprise   service  delivery   Comprehensive,   coordinated   data  collec4on   and  tracking   system  used  to   track  both   outputs  and   outcomes  (e.g.   %  decrease  in   substance   abuse)  over   4me;  data   trends  analyzed   and  used  to   refine   enterprise   service  delivery   From  REDF's  capacity  assessment  tool    
  20. 20. Resources •  Lingane, A. & Olsen, S. (2003). Guidelines for social return on investment. Working Paper Series, Center for Responsible Business, UC Berkeley. Retrieved from •  McNamara, C. A Basic Guide to Program Evaluation. Authenticity Consulting, LLC. Retrieved from %20Guide%20to%20Program%20Evaluation_0.pdf •  SROI Network. SROI: A History. Retrieved from Lawson F. Knight iiCredit Development Wind River Development Fund (307) 828-1618 Arum Kone Chief Technology Officer & Data Scientist Wind River Development Fund Brett White Executive Director Wind River Development Fund