In the Black Belt of Alabama, the division between black and white begins early. The public schools are almost entirely black; the private schools almost entirely white. Felicia Jones, executive director of the Black Belt Community Foundation, had two or three white classmates through third grade. By fourth grade, only one remained. Racial division in education mirrors division in adult life. The racial composition of civic leadership reflects the private schools. Until recently, whites completely dominated elected office. So, as the foundation works to transform its 12-county region in western Alabama, it places racial equity at the center of its methods.

As part of the 100 Lenses project, the foundation gives cameras to public and private school students, who use them to take pictures around their community. The students then come together at the University of Alabama for a week. Growing up in a town of 3,500, Jones says, blacks and whites never interacted. Now, these students are beginning to greet each other in Wal-Mart.

“To some, it may seem very small, but here, it’s monumental,” Jones says.

In rural communities and small towns, philanthropy can take stands, create coalitions, and break down racial barriers that other institutions avoid. Philanthropy plays the role of professor, listener, pulse reader, dream interpreter, and community organizer.

James Joseph, former president of the Council on Foundations and chair emeritus of the board at MDC, finds that foundations have five forms of capital: social, reputational, moral, intellectual and financial. With 100 Lenses, the Black Belt Community Foundation uses financial capital to convene and provide supplies to students. It uses social capital to increase trust, bringing together black and white students who would not normally interact. Finally, it uses moral capital, suggesting that a healthy and functioning society is one with interracial community and leadership.

Place-based, rural foundations can uniquely anchor long-term change by understanding and focusing the community’s long-term goals and exerting all five forms of capital towards those goals.


Social Capital

Community progress relies on social trust. Civic change happens when people come together, across their differences and in common purpose, to address a shared challenge or opportunity. Place-based foundations can be powerful catalysts for community change precisely because they are in a position to work closely with a range of community actors and institutions, from neighborhood-level nonprofits to government, business, and individual donors.

In short, foundations have a rich store of social capital: the networks of trusted relationships on which every community relies. However, not all deploy that social capital to its full potential.

Robert Putnam, the Harvard sociologist who has made the study of social capital his life’s work, has helped us see that social capital comes in two important forms: “bonding” social capital and “bridging” social capital. “Bonding” social capital defines the networks that exist among similar types of people, while “bridging” social capital characterizes networks between different types of people. Foundations have the potential to be “ambidextrous,” using both bridging and bonding social capital, because they occupy a critical crossroads in the community, harnessing mainstream resources and connecting them to grassroots concerns.

In a recent blog post for the New York Times, Nancy DiTomaso, a professor at Rutgers Business School, suggests that social networks play a powerful role in continuing today’s inequality. “Getting an inside edge by using help from family and friends is a powerful, hidden force driving inequality in the United States,” she writes.

So, a foundation that would like to see increased equity should consider putting at the center of its agenda changing who is in the conversation about a community’s direction. It can do that by changing the conventional definition of a philanthropist, by creating a board that reflects the community, and by convening groups that may never have interacted on a typical day. In using social capital, philanthropy can create stronger community ties.

In the mid-1940s, Dan River Mills operated more than a dozen mills, employing 14,000 in Danville, Va., a town of 40,000. In the late 1990s and early 2000s, the last of the mills of Danville began to close. Now, most of the sites sit empty or destroyed, and the independent mill villages have become part of the town.

The Danville Regional Foundation and other community leadership face the challenge of reversing a culture that stems from the mills, where hierarchy reigned and education did not matter. Karl N. Stauber, founding president and CEO of the foundation, often describes Danville as a “mill town without a mill,” still possessing many of the cultural notions of its former dominant industry.

“I’ve had people say to me recently that their opinion doesn’t matter, because the people at the mill are going to decide,” he says.

Stauber and other community leaders have challenged Danville to change the conversation from a hierarchal, top-down approach to one that values wide civic engagement and young and diverse leadership.

The foundation has conceived Middle Border Forward to improve economic prosperity by tapping into the ideas of a new, younger generation of leaders. The foundation, with the assistance of MDC, is working with a group of 50 people all under the age of 50 to develop new regional strategies to increase the vitality of Danville and its surrounding counties.

Through Middle Border Forward, the foundation’s leaders are using social capital by introducing new voices and creating new networks, and moral capital, calling for equity in the community culture. Finally, they are using reputational capital on rising leaders who are not a part of the top level of Danville’s hierarchy.

As an institution without a long history in Danville’s racial division and with a geographical charge that is not confined to a single county, Danville Regional Foundation has a unique position from which to disrupt the region’s patterns.

Moral Capital

In rural communities, foundations can take moral stands and alter the public conversation.

“Foundations can help our nation focus on the macro-ethics of our aggregate existence, the public values that build community,” says James Joseph. Often, doing that involves challenging racial prejudice and inequity, or suggesting the need for broader leadership. Foundation leadership can lower the social risk of tackling sensitive issues by helping policy makers and the public face difficult issues and imagine progress. Exerting moral capital requires philanthropic courage, but done wisely, the returns on investment can and will move society forward.

When Alan McGregor, now of the U.S. Endowment of Forestry and Communities, began work at the Sapelo Foundation in the late 1980s, rural Georgia had experienced a recent swing of racial violence. Sapelo was created in the 1930s from the desire of Dick Reynolds, son of the tobacco mogul R.J. Reynolds, to manage the affairs of the Georgia barrier island and do marine research. The foundation expanded its mission to include environmental justice and rural community organizing and development.

In Blakely, a small town on the Alabama-Georgia border, two young black children died in consecutive years from fires. Two of the local firefighters were members of local chapter of the Ku Klux Klan, creating deep suspicion that the fire department intentionally neglected black neighborhoods.

Blacks had almost no representation in leadership. Despite blacks constituting 42 percent of the town’s population, the city council had never had a black member and only one black person sat on the school board.

“We had to get more power within the rural black communities,” McGregor says.

Sapelo funded the Georgia Anti-Racism Initiative, which included money for the Blakely Concerned Black Citizens Committee. The committee was led by Benjamin Cawthon, an Army veteran who, upon returning from the military, went to the local sheriff and said, “This nation has trained me to look death in the face without fear, and I’m not afraid of you.”

Short-term, the committee won small victories. After the fire deaths, the Committee won a lawsuit, which called for greater sensitivity training and a condemnation of racism in city services. After a Voting Rights Act appeal by the Committee, the all-white city council scrapped an at-large system and established council districts. While the initiative did not immediately solve critical issues of poverty and underdevelopment, McGregor says, the violence stopped, a precursor for other economic and community changes. Cawthon eventually served on the city council, and died this year.

Sapelo combined its financial capital with moral capital, naming the issue of unequal power as an essential barrier to the community’s success. The deployment of moral capital by foundations is often a necessary first step in addressing the unpopular or controversial issues that hold communities back from economic and social success. And a foundation, which is set apart from the democratic governance that occasionally in our history suppresses the voices and interests of racial, gender, or intellectual minorities, has the unique ability and obligation to call attention to those issues.

Intellectual Capital

To address an issue, communities also need to understand the issue. Using connections to expertise and to means of communication, foundations can supplement community wisdom with wisdom not yet in use or circulation. They can close crucial information gaps between rural and urban communities. Foundations can commission data and research to help communities see the possible and calculate the costs of not acting.

“Information is as vital to the healthy functioning of communities as clean air, safe streets, good schools, and public health,” concluded The Knight Commission on the Information Needs of Communities in a Democracy. People must have available information, be able to engage with that information, and have opportunities to use that information in public life, the commission concluded. That is especially true in rural areas, with slower broadband access and fewer active media sources. Foundations face the balancing challenge of introducing new information (i.e., intellectual capital) while avoiding what the Otto Bremer Foundation calls “smarty-pants philanthropy.”

“How do you bring your knowledge to cross-pollinate a place with humility?” says Randi Roth, of the Otto Bremer Foundation in St. Paul, Minn. “You have to look at the wisdom that’s there. And it may not look like what passes for smart in the city, but don’t underestimate it.”

In a recent report, the Knight Foundation and FSG highlight the Incourage Community Foundation of Central Wisconsin. With the decline of paper mills, and the reduced circulation of a newsletter put out by Consolidated Papers, the major employer, Incourage began to think about ways of using a more engaged citizenry to meet the region’s economic needs.

It held focus groups and found fragmented information flows and growing Internet access that was still limited for low-income people. Incourage used the results of the focus groups, as well as volunteers who emerged from them, to construct a strategy to increase the community’s digital literacy and to launch a digital aggregator of events, job training, and community services.

“What we learned along the way is that information has its own ecosystem and reflects the culture of a community,” Incourage CEO Kelly Ryan says in the report. “In order to upend a culture that is paternal, dependent, and with a strong sense of entitlement, you have to include information in your change strategy.”

The Incourage Foundation used intellectual capital to build social capital, helping to circulate existing, community wisdom and leading to closer community ties.

Reputational Capital

Rural foundations can use their own positive reputation to place bets on people, organizations, or ideas that lack social ties and networks. That, in turn, increases public trust in those people, organizations, and ideas.

In Bowling Alone, Robert Putnam, the Harvard sociologist, suggests that social trust is declining in the United States. The percentage of people who say “most people can be trusted” declined from 55 percent in 1960 to about 35 percent in 2000. Interestingly, members of rural communities and small towns have much higher levels of trust than urban centers. Reputation, Putnam writes, is a critical foundation for trust in a community. If the owner of a corner store knows a customer has a habit of paying back loans on time, that owner will be more likely to allow the customer one more loaf of bread than the customer can afford in the moment.

That reputation, and resulting trust, can change through dense social ties, which come when people spend a lot of time in a common place. However, absent those social ties, we rely on formal institutions such as the legal system to ensure that others will act in good faith. What does this mean for the role of philanthropic institutions in the rural United States? Foundations can use their civic prestige, or reputation, to promote the reputation of unusual ideas, organizations, or people.

Early in Bonnie Hildreth’s time as executive director of the Barry Community Foundation in Hastings, Mich., the local library began a search for a new location. In Barry County, as in many rural places, the library’s importance extends beyond books to a place where people can gather or use the Internet. The search settled on a location away from downtown. A road would have to close, a prospect that created uproar among community members and local merchants. The library had raised money for the new construction. But when library directors spent some of that money for legal battles related to the new location, the public began to lose trust. The project appeared to be on the ropes, with the reputation of key players damaged and no alternative location.

One of Hildreth’s donors came to the Barry Community Foundation for help in convincing the library to pick an alternative location. “I have to find a way that these people can have some dignity in changing their minds,” the donor said. The Barry Community Foundation convened the board of the library and the government agency charged with downtown development and proposed an alternative: locate the library at the end of Main Street, near the edge of the industrial district. In doing so, the library would not only be in a prime spot, but also spur economic development in a less dense area of downtown. Finally, the foundation offered to help raise the money, promising donors that every dollar would go to “bricks and mortar.” The library and city came to an agreement on that proposal, and the money was raised within 18 months.

By placing its reputational capital in a faltering organization, the Barry Community Foundation helped to revive an important project, resolved a community dispute, and contributed to local economic development.


Financial Capital

In its 2007 The State of the South, MDC wrote that the South needs philanthropy to serve as the region’s “Passing Gear,” using a phrase borrowed from Paul Ylvisaker of the Ford Foundation. Economic growth had produced job growth, but also great economic inequality. While philanthropy had quite a history of successful initiatives, the South’s philanthropic sector needed not only to grow its assets, but to use those assets strategically.

“States and communities, of course, need a robust private sector to create jobs and an effective public sector to provide infrastructure and services,” the State of the South report says. “But, as Andrew Carnegie suggested a century ago and investor Warren Buffett echoed more recently, the capitalist system produces inherent inequities.”

It concludes by saying that “it is imperative that Southerners capable of doing so apply their wealth, their entrepreneurship, and their knowledge to forge stronger, more equitable communities and states, and by consequence, a more vital region.”

After years of lagging economic growth in rural areas and the continued shift of national foundations toward urban centers, the role of philanthropy as a passing gear is just as important, if not more important, in rural areas across the country today as it was in the South of 2007. Financial capital must grow, but also must combine with the other forms of capital—social, moral, intellectual, and reputational—to produce more equitable communities.

The comparative lack of financial capital in rural philanthropy is well documented, as is its growth potential. National foundations have disinvested in rural philanthropy, even during an increase in national giving. Between 2004 and 2008, philanthropic support for rural development decreased while overall philanthropic giving increased by 43.4 percent, according to research by Rick Cohen of the Nonprofit Quarterly. The National Rural Assembly, as well as many foundations that continue to work in rural areas, have begun to develop strategies to convince the nation’s largest philanthropies to reinvest in rural places.

At the same time, place-based philanthropy has the potential for rapid growth. The Rural Policy Research Institute Center for Rural Entrepreneurship, using formulas it has employed in communities throughout the country, estimates that $15.4 trillion will be passed from one generation to the next within the next 20 years.

But even with the capacity for growth in financial resources, place-based philanthropy’s financial capital has both great potential and great limits. Too often in rural communities, philanthropy is looked at as primarily a vehicle for relief. Organizations look to the local philanthropist as a stopgap when government cuts funding to early childhood education or local food banks. Rural foundations “need to get off the idea of being a charitable bank, and get on to the idea of community leadership,” McGregor says. Foundations often have to help the community choose priorities and make tough decisions about what not to fund. Often, in rural places, that focus turns to development, as jobs migrate to metropolitan areas.

While philanthropy may not be able to directly create jobs, it can leverage other resources and even change the definition of economic success; for instance, from recruiting the next auto plant to using local assets to grow rural entrepreneurship.

Important to changing the definition of success in rural development is “changing the mentality of how we recognize, reward, and identify success,” says Debby Warren, the founding director and a former colleague of McGregor at the Southern Rural Development Initiative.

Like much of the rural Midwest, west-central Minnesota has an aging population, out-migration, and decades of decline in the traditional agriculture industries. However, the average wage is improving, unemployment is below that of both Minnesota as a whole and the nation, and agricultural industries are showing resilience. The West Central Initiative, a community foundation for nine counties, has played an important role in that economic growth.

Since its founding in 1986, the initiative has given more than $35 million in loans to businesses in the region, and leveraged more than $165 million in loans. Over the past 25 years, West Central says it has created or sustained more than 6,000 jobs. McGregor points to West Central as “one of the few stories where you can point to intervention of rural philanthropy in transforming economic outcomes.” A study from the initiative found $800 million in infrastructure needs for the service area, so it followed up with specific proposals for sustainable solutions in various west central Minnesota cities. The next step, according to the region’s Comprehensive Economic Development Strategy, is “to bring reliable information to community leaders, funders, regulators and policymakers around this topic, encouraging their action to help resolve rural infrastructure problems.” The project spent funds on intellectual capital and was preparing to bring moral and reputational capital to bear on needed policy changes.


For 10 years, MDC has worked with boards of directors and senior foundation staff to examine how they can refocus their activities and deploy themselves to address the issues of fairness and opportunity in their communities. Our partners are moving from downstream work, focused on relief (the charitable bank that McGregor references above), to upstream causes of poverty and lack of opportunity. This work has shown MDC that philanthropy, ideally in partnership with other local institutions, can introduce new ideas, strengthen community bonds, and even re-imagine what is important. While that is true in philanthropy everywhere, the rural places and small towns profiled here lend a unique and particularly promising context. Not only do they have dense social ties, but also a passion for place and culture and passionate leadership, even if the leadership sometimes requires a push to open the doors to those not typically at the table.

Taken together, the creative deployment of multiple forms of capital can push rural philanthropy’s role away from that of community bank and toward institutions of vision, leadership development, and forward momentum. At its best, rural, place-based philanthropy has the potential to remind all of us how to build communities with equity and inclusiveness.