How Do We Know We Are Making a Difference? Impact Assessment at NJCC

There is constant conversation in the Community Development Financial Institution (CDFI) world about the impact of community and economic development (CED) work and how it is measured. Current CED measures fall short in capturing the meaningful and lasting contributions CDFIs and other organizations have made in communities throughout the country. The widely used system CARS, or CDFI Assessment and Rating System, evaluates organizational capacity and potential to perform in the CDFI industry, but does not measure impact. This void has pushed CDFIs to ask, both internally and externally, how do we shift from being output oriented to being outcome and impact oriented? NJCC is invested in figuring out how to best measure its impact in New Jersey’s communities.

Currently, NJCC has taken an output approach to impact measurement, similar to most CDFIs in the industry. The difference between outputs and impact matters. Let’s use NJCC FY16 loan portfolio to better understand the difference. In FY16, NJCC made 43 loans, with a loan close amount of $29MM. These loans created or retained 460 housing units, 1203 jobs, 2564 education seats and 749,000 square feet of community and commercial space. The measured outputs show that NJCC heavily invests in socially-motivated projects. The numbers do, however, tell a limited story of production and do not provide NJCC with a strong understanding of how we have helped transform low and moderate income communities throughout New Jersey. We, like many CDFIs throughout the country, want to push our impact measurement instruments to start articulating our story of transformation.

Moving from output to impact measurement is not an easy transition. It will require a mixture of primary and secondary data collection. Data collection must also address the differences in our lending sectors. Although NJCC was founded as a small affordable housing lender, we have expanded our services over the years to meet a wide range of community needs. The data sources and metrics used must correspond to the lending activity; this means that some metrics will vary based on the type of loan. NJCC currently collects impact data based on loan close survey data given to us by our borrowers. In order to capture the full impact of our loans in the community, we must couple our borrower outcome projections with new secondary data sources.

Thankfully, NJCC is not starting from scratch. In 2011, NJCC worked with a group of students from Rutgers University’s Bloustein School who recommended a methodology for assessing the social outcomes of NJCC’s financing. As NJCC continues to think about a new impact assessment tool, this practicum will serve as a foundation. NJCC will work to develop an impact measurement tool that helps NJCC rate the level of impact associated with loans moving through the loan close process. Similar to a risk rating matrix in our underwriting process, the tool will use data driven metrics to determine the impact of a proposed loan.

Impact assessment presents many challenges. It forces us to ask tough questions: How do we accurately measure our role in the story of transformation? Do the proposed metrics most closely align with our lending goals? It is important to recognize the limitations of the data sources used in impact assessment and the complexity of using the data. CDFIs and other community development organizations alone cannot claim responsibility for all success in the low and moderate income communities they target. NJCC can, however, take advantage of publicly available data sources and create methodologies that help us better understand if we are achieving our goals and fulfilling our mission throughout New Jersey.