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CSBDF Releases Report on Economic Impact

February 10, 2020 / Jamie McCall / Community Development, Economic Development, Economy, Jobs & Employment, Public Policy, Small Business

In this post Vice President of Policy and Research Jamie McCall explores the results of CSBDF’s recent economic impact analysis. The report is also available as a short brief. For more information about our research program, click here

Measuring Impact is Hard, but Important

As a community development financial institution, CSBDF engages in a wide array of programs to foster sustainable development across North Carolina. But measuring the work of community economic development is challenging[i]. Our programs and interventions have both qualitative and quantitative outcomes. Though many – if not most – of CSBDF’s primary outcomes are qualitative in nature, these can be the hardest types of impact to measure[ii].  For example, scholarship supports that our programs are contributing to expanded entrepreneurial networks and increased community social capital.

In terms of quantitative impacts, CSBDF’s programs have an array of economic effects. We analyzed how CSBDF’s lending activity promoted economic activity over one year.  When CSBDF gives loans to entrepreneurs, they can open and expand Main Street businesses in ways that would not otherwise be possible. By leveraging CSBDF’s capital, lending clients are creating economic activity that ripples across the area. These types of small business assistance efforts have been long correlated with positive outcomes like aggregate economic growth and lowering income inequality.[iii]

Quick Explainer on Multipliers

Economic impact is usually measured through multipliers. A multiplier measures how important the modeled economic activities are to other industries are within a region. Multipliers can be added up to express how a businesses’ activities have ripple impacts throughout the economy.[iv] We use an input-output model, which includes up to 4 levels of effects.[v] Put simply, what we’re measuring is the total net economic contribution CSBDF’s lending clients.

Figure 1. Economic Impact Ripple Effects

Take the example of a new restaurant that opens with 20 full-time equivalent employees. According to the input-output model, this would create a 1.87 earnings multiplier. For every $1.00 the business pays in earnings, $0.87 of additional earnings activity would be generated throughout North Carolina. The restaurant’s 20 employees would also have a 1.40 jobs multiplier, meaning their initial employment of 20 people would support 8 other full-time positions.

Input-Output Modeling Caveats 

Economic impact models operate on a variety of assumptions. The accuracy and reliability of the model relies on those assumptions being correct. Our analysis uses EMSI’s Input-Output product, which provides more conservative estimates than other forms of modeling like IMPLAN.[vi]  The model’s inputs are based on reported job creation and losses from CSDBF’s clients between July 2018 and June 2019. We include net job loses to provide an objective assessment of our work. The model’s inputs are available as an index table in the full report.

 Small Firms, Big Impact

During fiscal year 2019 CSBDF issued 58 loans for $5.8M. The businesses who received those loans generated economic activity that resulted in the below earnings, jobs, and tax revenue outcomes. On average each loan issued helped create $224,383 in earnings, 4.8 full-time jobs, and $20,755 in taxes.

Table 1. CSBDF’s One Year Economic Impact 

The earnings multiplier for these small businesses is 1.94. For every $1.00 of earnings they create through paying their employees, $0.94 of earnings activity is generated in other firms. Because CSBDF lends to Main Street firms, most of the earnings multiplier is from induced effects.

Table 2. Change in Aggregate Earnings

From July 2018 to June 2019, CSBDF’s lending clients reported creating 148 new full-time jobs. These jobs helped support 130 new positions throughout North Carolina. Those 130 new jobs are created a variety of industries – including some that you may not expect. For example, CSBDF’s lending clients helped support 57 jobs in manufacturing and 11 jobs in scientific services. A full breakdown of job creation by industry is available in the full report.

Table 3. Change in Net Job Creation

Our data reinforces what objective research has long demonstrated – small businesses are vital for development.  In short, supporting small businesses has outsized economic development impacts. [vii] In the years to come, CSBDF will continue to refine how it measures its outcomes to better assess how we’re contributing to North Carolina’s economy.


[i] Michael Swack, Eric Hangen, and Jack Northrup, “CDFIs Stepping into the Breach: An Impact Evaluation—Summary Report” (Carsey School of Public Policy, University of New Hampshire, August 2014), https://scholars.unh.edu/carsey/236.

[ii] John Caskey and Robinson Hollister, “Business Development Financial Institutions: Theory, Practice, and Impact,” Discussion Paper (Madison, WI: University of Wisconsin, Institute for Research on Poverty, 2001), ; Donna Fabiani and Terry F. Buss, eds., Reengineering Community Development for the 21st Century (New York City, NY: Routledge, 2008); Alexander von Hoffman, “The Past, Present, and Future of Community Development in the United States,” in Investing in What Works for America’s Communities: Essays on People, Places, and Purpose, ed. Nancy O. Andrews et al. (San Francisco, CA: Federal Reserve Bank of San Francisco and Low Income Investment Fund, 2012), 10–54; Robert G King and Ross Levine, “Finance, Entrepreneurship and Growth: Theory and Evidence,” Journal of Monetary Economics 32, no. 3 (December 1, 1993): 513–42, https://doi.org/10.1016/0304-3932(93)90028-E.

[iii] Timothy Bartik, “Evaluating the Impacts of Local Economic Development Policies on Local Economic Outcomes: What Has Been Done and What Is Doable?,” in Evaluating Local Economic and Employment Development: How to Assess What Works among Programmes and Policies, ed. OECD (Paris, France: OECD, 2004), 113–41, https://doi.org/10.1787/9789264017092-en; Lehn Benjamin, Julia Sass Rubin, and Sean Zielenbach, “Community Development Financial Institutions: Current Issues and Future Prospects,” Journal of Urban Affairs 26, no. 2 (2004): 177–195; Michael W.P. Fortunato and Theodore Alter, “Community Entrepreneurship Development: An Introduction,” Community Development 46, no. 5 (October 20, 2015): 444–55, https://doi.org/10.1080/15575330.2015.1080742; Julia S. Rubin, “Adaptation or Extinction? Community Development Loan Funds at a Crossroads,” Journal of Urban Affairs 30, no. 2 (April 1, 2008): 191–220, https://doi.org/10.1111/j.1467-9906.2008.00387.x.

[iv] Ronald E. Miller and Peter D. Blair, Input-Output Analysis: Foundations and Extensions, 2nd ed. (New York City, NY: Cambridge University Press, 2009); M Henry Robison, Timothy Nadreau, and Jonathan Crapuchettes, “I-O Model Documentation: Establishing the NAICS 6-Digit US Base Model” (Moscow, ID: Economic Modeling Specialists International, December 1, 2015).

[v] Geoffrey J. D. Hewings and Rodney C. Jensen, “Regional, Interregional and Multiregional Input-Output Analysis,” in Handbook of Regional and Urban Economics, Handbooks in Economics, Series 4 (New York City, NY: North Holland, 1987), 295–355, https://doi.org/10.1016/S1574-0080(00)80011-5; Scott Loveridge, “A Typology and Assessment of Multi-Sector Regional Economic Impact Models,” Regional Studies 38, no. 3 (May 1, 2004): 305–17, https://doi.org/10.1080/003434042000211051.

[vi] Sungsoo Kim and Chad R. Miller, “An Economic Model Comparison of EMSI and IMPLAN: Case of Mistletoe Marketplace,” Tourism Economics 23, no. 5 (August 1, 2017): 1124–30, https://doi.org/10.1177/1354816616656420.

[vii] Zoltan J. Acs et al., “Entrepreneurship, Institutional Economics, and Economic Growth: An Ecosystem Perspective,” Small Business Economics 51, no. 2 (August 1, 2018): 501–14, https://doi.org/10.1007/s11187-018-0013-9; Matteo Aquilina, Rainer Klump, and Carlo Pietrobelli, “Factor Substitution, Average Firm Size and Economic Growth,” Small Business Economics 26, no. 3 (April 2006): 203–14, https://doi.org/10.1007/s11187-005-4715-4; David Birch, “Who Creates Jobs?,” The Public Interest 65, no. 3 (1981): 3–14; Gregg A. Lichtenstein and Thomas S. Lyons, “The Entrepreneurial Development System: Transforming Business Talent and Community Economies,” Economic Development Quarterly 15, no. 1 (February 1, 2001): 3–20, https://doi.org/10.1177/089124240101500101; David Neumark, Junfu Zhang, and Brandon Wall, “Where the Jobs Are: Business Dynamics and Employment Growth,” Academy of Management Perspectives 20, no. 4 (2006): 79–94.