A Proposed Performance and Accountability Framework for Community Development Finance in the UK
At a time of significant growth and policy interest in community development finance, it is crucial to have clear and concise ways of understanding the performance of community development finance institutions (CDFIs).
The research by the New Economics Foundation revealed the extent of poor performance among soft-loan funds in the UK and states that, the failure of many soft-loan funds makes it essential that CDFIs are able to differentiate themselves from soft-loan funds and to substantiate their record. Given the diverse and underdeveloped state of the management information systems of most CDFIs, many need to develop substantially before they can get to the stage where they can generate even the basic indicator sets listed in the Performance and Accountability Framework. The paper makes the following suggestions to help CDFIs improve performance:
- CDFIs should report on additional indicators that better reflect their individual mission and purpose (particularly aspects of their social performance) and should give these equal prominence. As with a social audit, there may be good opportunities for CDFIs to engage their stakeholders in setting such indicators;
- CDFIs should also continue to commission evaluations, even jointly to reduce the costs;
- CDFIs should carry out external evaluations, especially of impact, at least once every three years and move towards low-cost non-validated internal evaluation every year;
- Core indicators and benchmarking work best when based on a shared standards. The evolving association of CDFIs is best placed to advance core indicators and benchmarking across the sector, in collaboration with stakeholders such as banks and other investors. It can also help its members develop effective management information and reporting systems.
Over time, it is likely that full membership of an association or eligibility for advantages such as the Community Investment Tax Credit will require that CDFIs produce, and make publicly available, performance assessments of this kind. Overall, the aim should be that by the end of 2002, all CDFIs publish an agreed set of performance and accountability.
