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Ready Rural Capital Access and Flow [1]

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Date: 2024-06 

Evidence suggests this building block is important because experts argue that rural areas’ potential for positive economic “ripple effects” across regions are underestimated—and that investment is critical in areas that steward national food systems, water supplies, and natural recreation areas.1 In addition to regional effects, rural communities have also been critical to national economic recovery from recessions and other economic shocks—despite a history of disinvestment.2

With regard to public capital, tax base size and scope can be a limiting factor in rural areas. For example, in Indiana, rising farmland values since at least 2002 have boosted rural counties’ ability to fund basic services but concentrated the tax burden on fewer individuals, including farmers, as populations decline.3 Some experts note funding for health services may be biased toward serving areas with larger populations; this “structural urbanism” is named as a barrier to rural areas receiving adequate public investment.4 Recommended solutions include a “rural audit” of criteria used in federal community and economic development programs to address barriers to entry for rural areas.5

With regard to private capital, researchers note historic underinvestment in rural areas by venture capital firms and recommend investment via community development venture capital (CDVC) firms, with the caution that fund management teams must ensure positive returns.6 CDVC investments tend to be in rural (nonmetro) areas, “in industries outside the venture capital mainstream,” and their profitability is unclear.7 However, CDVC activity may increase traditional venture capital activity, which is a benefit.7 Nearness to cities may also mean greater access to capital and employment opportunities for residents of adjacent rural counties.8

More than 1,000 Community Development Financial Institutions operate across the US, with almost 30% of CDFIs receiving grants serving rural markets.9 CDFIs can expand economic opportunity for communities excluded from mainstream lending and other financial services,10 though increased CDFI lending is needed in rural areas.11 In rural and urban settings, Community Development Financial Institutions (CDFIs) serving Native communities successfully administer business, home, and personal loans, in addition to providing technical assistance and training.12 Responding to the “disconnect between tribal communities and traditional sources of development capital such as banks, credit unions, and other commercial lenders,” experts have also proposed the creation of a Tribally Chartered Bank (TCB), with regulation by an independent, tribally appointed governing body.13

With regard to philanthropic investment, research shows that rural communities receive fewer grants from foundations than what may be needed, given their share of the US population, with less value per capita compared to metro counties—and that even among rural recipients, distribution is uneven.14 Compared with grants received by urban applicants, rural organizations are more likely to receive grants for higher education, environmental concerns, and recreation and leisure; grants are also more likely to support direct investments in physical and human capital than financial or intellectual capital.14 The Walsh Center for Rural Health Analysis has strategies for rural programs to build partnerships with philanthropies.15 Recent research by the First Nations Development Institute also finds that Native-led nonprofit organizations receive a tiny percent (0.23) of US philanthropic funds, a disproportionately low share of funding for Native populations, which are approximately two percent of the overall US population;16 communities are also among those of “greatest need”.17

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[1] Url: https://www.aspencsg.org/ready-rural-capital-access-and-flow/

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