Using Research to Build the CDFI Industry

Originally published 10/30/2020

Utilizing industry expertise has significantly enhanced FUND CI’s research. FUND CI’s recently released report Bending Toward Justice: Credit Scores as a Measure of CDFI Impact details research conducted in conjunction with the Credit Builders Alliance (CBA), and is the most recent example of the value of collaborations. To expand on the report, FUND CI Board Member Emily Sipfle recently interviewed Talia Kahn-Kravis, CBA’s Manager of Innovations and Business Development to get her insights on key report findings and how CBA is leveraging the report.

CBA is an innovative national nonprofit network dedicated to building the capacity of a diverse and growing network of hundreds of nonprofits across the country. CBA was created by and for its nonprofit members as a bridge to the modern credit reporting system and to date has helped millions of individuals with poor or no credit participate in the mainstream financial system by building credit.

Leveraging Data into the CBA Toolkits

One of CBA’s newer initiatives, CBA Fund, supports nonprofit lenders providing small dollar consumer credit building loans (SDCBLs) in a range of ways, including offering funding as well as resources and tools through CBA’s Training Institute. Utilizing findings from the research, CBA created a Credit Builder Loan Toolkit. Credit Builder Loans (CBLs) are unique “starter” loans made for the sole purpose of helping people (re)establish credit. The toolkit provides best practices for the design and implementation of a CBL program. Also included is technical guidance on credit reporting for CBLs, ways to apply existing research about CBLs to your program, and case studies.

To learn more about CBA’s Toolkits and other work, please visit CBA’s website.

Considering Impacts

The research project largely focused on borrower credit scores as a measure of success that could be tracked across organizations. Fifty-nine percent of respondents reported major changes in credit scores for their borrowers, particularly among those that start with no credit score or thin files. Throughout the project, however, practitioners highlighted the anecdotal and qualitative ways they see the impact of their work. Kahn-Kravis summarized this, noting that “Credit building isn’t meaningful unless it helps people get to where they want to be with their financial goals.” While data collection and impact tracking are not consistent, CBA’s members track a range of measures beyond credit score such as goal achievement, referrals to a bank or other lender, and graduating to other products either at the same organization or with another lender.