Summary

In economically distressed communities, where access to credit and investment capital through conventional sources is often limited, private for-profit and nonprofit development financial institutions (CDFI), such as nonprofit loan funds and community credit unions, provide lending and investment services. Recognizing the proven ability of CDFIs to identify and respond to communities' financial needs, Congress created the CDFI Fund in 1994 to support investment in and assistance to CDFIs. GAO surveyed 925 CDFI organizations that were members of a national CDFI trade organization, had applied to the CDFI Fund for an award, or had been certified by the Fund as a CDFI. This report presents the results of GAO's survey, describing the characteristics of the 623 CDFI organizations that responded to the survey and discussing the extent to which they reported using performance measurement to assess progress toward their goals.

GAO noted that: (1) of the CDFIs that responded to GAO's survey, about 70 percent have been in existence for more than 6 years, and about 74 percent have less than $5 million in assets in their loan or investment portfolios; (2) approximately 88 percent of the respondents indicated that they provide lending services for such areas as community development, housing, or small businesses, while about 20 percent reported providing equity capital for businesses; (3) the respondents also reported that they target their services to specific populations, such as low-income and moderate-income persons, members of minority groups, and women; (4) the characteristics reported by CDFIs that had been certified by the CDFI Fund differed to some extent from those reported by noncertified CDFIs; (5) the CDFIs also reported using several key elements of performance measurement, including goals, measures, business or strategic plans, and program evaluations; (6) six general community or economic development goals were identified as primary by over half of the respondents; (7) helping to revitalize a targeted community was the most commonly selected community development goal; it was the only such goal selected by a majority of the respondents as primary for their organization; (8) in addition, at least three specific goals were identified by over half of the respondents for each type of service they provide; (9) the most frequently reported goals for each of the financial services provided were providing affordable services, providing affordable loans and retaining or expanding existing businesses; (10) more important, respondents reported measuring both activities and accomplishments to assess their progress toward their specific goals; (11) for instance, four activity measures were identified as most important for assessing progress by at least 56 percent of the respondents providing lending services, and four accomplishment measures were identified as most important by at least 53 percent of these respondents; (12) these activity measures included the number and dollar amount of their loans and the number of borrowers; (13) the number of borrowers performing successfully on existing loans was the most frequently reported measure of lending accomplishments; (14) additionally, the respondents reported maintaining a variety of operational statistics to help assess their progress; and (15) almost 90 percent reported having either a business or a strategic plan, and about 56 percent reported that an evaluation had been conducted, either internally or externally, to measure the success or impact of their services.