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Rural America is far more diverse than how it is portrayed in media and popular culture. This article is the second in the series Eradicating Rural Poverty: The Power of Cooperation. Coproduced by Partners for Rural Transformation, a coalition of six regional community development financial institutions, and NPQ, authors highlight efforts to address multi-generational poverty in Appalachia, the rural West, Indian Country, South Texas, and the Mississippi Delta.

At its core, policy is about the allocation of resources. Far too often, policy decisions influencing the flow of resources fall short in meeting the needs of low-resource rural people and places.

Public funding programs often include conditions that exceed the capabilities of high-poverty areas, such as requiring matching funds that these areas do not have. Philanthropy often relies on large, national intermediaries that lack local knowledge and relationships. The private sector tends to prioritize investing in their backyards, as evidenced by banks that follow the path carved by the Community Reinvestment Act, a path tied to their physical network of branches—even as rural communities have borne the brunt of branch closures.

Nearly nine out of 10 the nation’s persistent poverty counties are rural, and they face chronic underinvestment.A different approach that centers community voice is sorely needed.

Community development financial institutions play an important role in elevating community voice. Often, CDFIs anchored in rural communities, with demonstrated track records of investing in rural persistent poverty areas, are the difference between a good idea that remains floating in the air, and tangible, system-changing outcomes. Achieving this requires that these CDFIs have adequate and patient resources needed to innovate and invest in rural people and strengthen rural infrastructure.

Outlining Key Investment Gaps in Rural America

Nearly nine out of 10 of the nation’s persistent poverty counties are rural, and they face chronic underinvestment by government, philanthropy, and the private sector. Moreover, research by sociologists Linda Lobao and Paige Kelly has documented the common lack of “governmental capacity” in rural areas. Roughly one-third of rural counties reported the presence of an economic professional who could identify and write grants for local government. In contrast, over half of all urban counties had either an economic development professional or a community planner on staff. And, as noted earlier in this series, philanthropic investment in rural America grossly trails national averages. Chronic underinvestment in poor rural communities can also be seen in both the corporate and public sectors.

Private Sector Underinvestment: Banks play a vital role in providing and attracting private capital for economic and community development. However, an analysis conducted by the Federal Reserve found that over 40 percent of rural counties lost bank branches from 2012 to 2017. Notably, in rural counties that suffer from the most acute loss of branches, residents had lower incomes, lower levels of education, and were more likely to be Black than in other rural counties.

Federal Shortfall: The Federal Reserve’s findings about banks carry weight for rural communities due to the strong link between the presence of bank branches and federal Community Reinvestment Act requirements. CRA requires that banks lend, invest, and provide financial services to people and communities proximate to their branches. Unfortunately, in the absence of bank branches and corresponding CRA requirements, rural communities are disproportionately starved of capital.

Developing Policy

In addition to the deep disparity in public and philanthropic investment between urban areas and poor rural areas, too often, when investments are made in rural communities, they occur in a vacuum. Frequently, those who design public and private investments lack a clear understanding of the challenges rural persistent poverty communities and communities of color face in simply accessing funds, let alone implementing programs and wading through cumbersome administrative requirements.

The solution is not a hard one, but it does require planning ahead. It requires listening and honoring those with the knowledge, relationships, and skills to guide investments and programs to success. People who live and work in these communities are an all-too-often untapped but invaluable resource.

As Lobao and Kelly found, small businesses, local governments, and nonprofits often lack the capacity and expertise to complete and submit lengthy, technical funding or assistance applications. And as was the case when the Paycheck Protection Program first launched during the pandemic, the funding often runs out before they can apply for it—claimed by those with more resources and usually less need.

The Partners for Rural Transformation coalition of CDFIs seeks to translate “rural” for policymakers so that our communities have a direct say in the crafting of federal policy. This means addressing the complex challenges and opportunities in rural communities and communities of color, especially those experiencing persistent poverty—and advocating on their behalf.

Navigating Policy: Advancing Rural Interests amid a Pandemic

Programs that provide investments often fail because they are created at the 10,000-foot level, which excludes the wisdom and expertise of local organizations that do the work. Federal policy, which is often implemented through state governments, adds layers of complication. Each state has its own priorities, politics, and processes, and states have broad discretion in how to distribute funds.

In short, it is critical for legislators to include existing networks—those that are already familiar with both individual state intricacies and community needs—in the policymaking process. But this does not happen without community pressure. The rollout of the Paycheck Protection Program, one of the largest economic relief programs implemented during the COVID-19 economic shutdown period, illustrates these challenges—as well as the way CDFIs responded to these challenges.

As readers will recall, uncertainty reigned in the early days of the pandemic as shelter-in-place orders impacted small businesses and millions faced unemployment. When federal aid did come in the form of PPP forgivable loans (effectively grants), it soon became apparent that the funds would not be distributed equitably. Rural communities, especially those that experience persistent poverty, often lack banking services and the existing relationships that enabled well-heeled urban businesses to secure PPP loans more quickly, leaving out smaller rural businesses that needed assistance. And initially, CDFIs were not included in the program.

The CDFIs in our coalition used our collective voice to ensure the CDFIs that serve rural and persistent poverty communities could issue PPP loans. The Small Business Administration pilot loan program gave CDFIs access to distribute PPP loans and lines of credit. Three PRT members—HOPE Credit Union, Rural Community Assistance Corporation, and Communities Unlimited—collectively deployed over $160 million in capital through more than 5,600 PPP loans. This helped preserve more than 17,000 jobs.

Leveraging Philanthropy

A major impediment for rural reinvestment involves the onerous requirements imposed by state governments to access federal funds.

RCAC recognized early on that helping rural economies recover would take more than emergency and short-term financial assistance. Leveraging philanthropic support, during the pandemic, RCAC created the Re-Emerging Loan Fund (RELieF) program, which combines grant and loan financing—matching low-interest loans with small business coaching. (Sometimes, this approach is known as providing integrated capital, because it combines loan and grant support.)

As COVID-19 surged, one borrower from RCAC, freelance journalist Libby Leonard relocated to Hawaii, where she specialized in telling local community-centered stories. RCAC not only provided her a loan, but one-on-one business coaching sessions that enabled her to secure other work. One article she wrote about education-focused agriculture nonprofit Kahua Paʻa Mua helped open the door for that nonprofit farm to secure a $70,000 grant to fund its youth program for a year. In short, the RCAC program benefitted the community beyond the borrower. The farmer Leonard featured in her article is now receiving free mulch for life thanks to the exposure—and is looking to expand his business by launching a composting operation on one of his farms.

A Government Workaround in Alabama’s Black Belt

A major impediment for rural reinvestment involves the onerous requirements imposed by state governments to access federal funds—for example, by requiring cash-poor towns to directly finance the work they do and then file for reimbursement.

Again, the pandemic provides an illustrative example. In Alabama, the state government insisted that cities front expenditures and apply for reimbursement after purchasing personal protective equipment. As a result, the most underresourced towns—many of which were majority Black—were effectively excluded from purchasing PPE. Mayor Walter C. Porter, Sr. of Epes, AL, summed up the conundrum: “We didn’t have the cash to do it. Our total annual budget is $55,000. We have a population of less than 400. . . .We don’t have a grocery store. We don’t even have a traffic light.”

A group of state legislators and local elected officials in the Black Belt called on HOPE and the Black Belt Community Foundation in Selma, AL, to bridge the gap. In response, HOPE provided a loan to BBCF, which then gave recoverable grants to small towns for PPE. As the small towns were reimbursed, BBCF recovered the funds, and the loan from HOPE was repaid. In total, 23 communities participated in the program, drawing down nearly $1 million. The program was replicated in the Mississippi Delta, where communities were able to access another $600,000. All the grants were recovered, raising further questions about perceived “risk” and the wisdom of reimbursement requirements in the first place.

A Long-Term Investment in Rural Health

Another critical need is access to healthcare. Unfortunately, healthcare access in rural communities has been compromised by hospital closures. Again, the ability to import a diverse set of resources positions CDFIs, in many cases, to be the only source of capital available to update and preserve vital healthcare infrastructure.

Several years ago, HOPE surveyed federally qualified health centers in Mississippi and identified opportunities for expanding services and locations. The fruits of this work continue today at the Greater Meridian Health Center. GMHC is a Black-led, federally qualified health center. Incorporated in 1986, GMHC serves about 8,000 patients a year, 87 percent of whom are people of color and 94 percent of whom earn incomes below the federal poverty line. HOPE recently financed the construction of a satellite site in Macon, a small town of 2,500 residents—four out of five of whom are Black. The clinic extends access to primary care and dental services for county residents who otherwise would need to drive an hour for their healthcare.

Funding should be just one aspect of a broader ecosystem of investment in low-wealth rural communities.

Moving Forward

Looking ahead, policymakers, philanthropy, and the private sector all must act to create the conditions necessary for increasing rural investment. Here are some priority areas where policy can make a difference.

  • Increase investment in CDFIs that support rural development: As the stories above attest, CDFIs have long track records of working with local people to bring their visions to fruition.
  • Track investments: It is not enough to give resources to CDFIs. It is vital to monitor housing, small business, and community facilities investment by geography, race, and gender. In the absence of detailed data to measure community development outputs, communities cannot track progress, and the status quo will likely be perpetuated.
  • Simplify requirements to draw down federal dollars: Local governments—particularly in rural persistent poverty counties—do not have the financial resources to front dollars and wait for reimbursement. While common, this practice discriminates against these communities by limiting access to essential resources needed to respond to disasters. Similarly, match requirements exclude rural communities from accessing vital infrastructure dollars to support a basic quality of life for their residents.
  • Support advocacy: At the end of the day, the loans and investments provided by CDFIs are simply tools to demonstrate how the financial sector should work to meet the needs of all people. Of much more consequence is the advocacy work of CDFIs to change the systems of public and private finance that created the racial wealth gap and persistent poverty areas. While it’s notable that a CDFI helped ensure that Black Belt communities were able to purchase PPE, it should not have been necessary.

With a history of deep engagement with residents in persistent poverty communities and a track record of effective interventions, CDFIs can be powerful advocates that help to inform how public, private, and philanthropic resources are directed. Such work, however, does not fund itself. CDFIs working in persistent poverty places merit having access to reliable, meaningful philanthropic investment to support the work of systems change. And this funding should be just one aspect of a broader ecosystem of investment in low-wealth rural communities.

The people who live in the communities we serve know their needs best. Through increased investment and support for advocacy, CDFIs can continue to build the communities long sought by local people and change the conditions that make the work of CDFIs necessary in the first place.