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evaluation

Pilot Phase Evaluation of the Community Development Finance Institution

Evidence type: Evaluation i

Description of the programme:

What Works funding was provided to co-ordinate and evaluate the pilot phase of an innovative approach taken by three Scottish councils to establish and support a Community Development Finance Institution (CDFI). The aims of the CDFI were to offer those living in the lowest income households in Falkirk, Fife and West Lothian (totalling 700,000 residents) access to affordable credit, and to promote take up of wider advice and support services by those in need, including:

  • a more affordable alternative to higher cost short-term lenders targeted at individuals who are unlikely to be able to access mainstream credit options and who may be experiencing financial exclusion;
  • telephone and online services; and
  • four Conduit Scotland pop up shops offering face to face lending services, in which staff engage with individuals through community based services and events which are targeted at areas of multiple deprivation.

In the period June 2017 to February 2018, the time period the evaluation covered765 loans with a total value of around £354,587.08 have been made.

The study

The research questions the project sought to address were:

  1. How does the provision of affordable credit influence access to products for consumers who would otherwise be unable to access lending or influence their credit choices more broadly?
  2. How do face-to-face, online and telephone channels compare as effective forms of delivery? Are customers more likely to take up support services if referred face-to-face? Are face-to-face service points (shops) in the most accessible locations?
  3. How important is the partnership model involving local authorities? What added value does this bring?

A process and outcomes based approach was chosen to evaluate the success of the project. Stakeholder engagement underpinned the evaluation process at all levels and was achieved through a combination of structured surveys, workshops, focus groups and one-on-one interviews. To identify the effectiveness of service delivery and referral pathways in relation to customer channel choice, a customer journey mapping exercise was undertaken among target groups (benefit dependent, in-work on low wage, single parents and those living in social housing or the private rented sector) in Falkirk, Fife and West Lothian.

Key findings

Initial findings suggest that the CDFI has contributed towards delivery of the following intended outcomes:

  • 50% of CDFI customers, by securing affordable loans have improved access to financial services and increased awareness and understanding of affordable credit options;
  • 60% of CDFI customers, when referred onto other advice and support services, have increased confidence and ability to manage money on a day to day basis;
  • Falkirk, Fife and West Lothian councils have improved relationships and increased opportunities for partnership working;
  • Falkirk, Fife and West Lothian councils have jointly established a cost-effective approach to promoting financial inclusion and reducing poverty in their constituent areas.
  • CDFI Customers are less likely to apply to higher cost ‘for profit’ credit providers after getting a loan from Conduit Scotland;
  • The method by which individuals choose to apply for loans is complex, but most CDFI customers indicated a preference for online services as they are convenient and confidential.

Points to consider

Methodological limitations:

  • Whilst requests to complete the survey and to take part in the interviews were made to their customers by Conduit Scotland on behalf of the Improvement Service, the take up rate was relatively low (c5%), despite modest financial incentives being offered;
  • It is acknowledged that the sample sizes were significantly lower than hoped for, and as a result the level of confidence in the results was adversely affected;
  • Selection bias is likely to have been a factor as all customers were contacted and invited to participate and random sampling was not possible;
  • The evidence produced is at level 2 on the Nesta Standards of Evidence scale.

Key info

Activities and setting
The consortium model is designed to help low income houses in Scotland with community based initiatives centred on affordable credit.
Programme delivered by
Community Development FinanceInstitution (CDFI)
Year of publication
2018
Country/Countries
Scotland
Contact information

Improvement Service, iHub, Quarrywood Court, Livingston EH54 6AX