Continuing the Conversation around Place-Based Strategies: Fed Communities’ Insights on Strengthening Rural Economies through Investment

In a recent blog post, my colleague Colt Jensen stated, “Definitions are not just academic. They shape who gets served, what gets funded, and how success is measured.” He was speaking about how understanding specific contexts and definitions of being a “rural place” is critical for community and economic development officials’ work across North Carolina. This post continues that conversation with a focus on a recent offering of the Federal Reserve Community Development Research Seminar Series titled Place-Based Strategies: Strengthening Rural Economies Through Investment. The seminar was recorded and can be found at the link above.

The seminar was hosted by the Federal Reserve Bank of Richmond, which in turn hosts the Rural Investment Collaborative. The Collaborative serves multiple states, including North Carolina, with specific training and support on local project proposal preparation on one hand, and advocating for increased funding access for small rural towns on the other. North Carolina has had significant experience with the Collaborative with partners throughout the state.

The seminar opens with a centering discussion about a common option to strategically use investment to spur economic growth in rural places: CDFI’s – Community Development Financial Institutions, which can provide a variety of types of funding for development projects. The seminar provides a good general overview of CDFIs – as of this March, North Carolina has a strong presence of CFDIs compared to other states, with 161 branches across 25 CFDIs. A description of the work being done in N.C. and map of investment amounts can be found here, and map of CFDI locations can be found here. The seminar continues with an in-depth look at CFDI work specific to Native Communities, many of which are rural.

The third presentation in the seminar is of particular interest to N.C. rural communities, which discuss the flow of philanthropic funds to and from these areas. Economist Nicolas Chiumenti from the USDA Rural Development Office points out that philanthropic funds for rural investment in general have three wonderful characteristics compared to other financing – they tend to be flexible, versatile and mitigate risk. 

After framing the issue and organizations involved, Dr. Chiumenti turns to some startling data that illustrates the challenges to and benefits of investment in rural areas:

• 52% of rural counties in the U.S. have only one or no grantmaking organization based locally.
• 49% of urban counties have five or more.
• Almost 50% of grant funds in both rural and urban counties stay in those counties
• Yet outside of the home county, rural philanthropy tends to stay in the home state at twice the rate of urban areas (rural philanthropy 27%-35% vs. urban philanthropy 14%-16%)

While these data shine a light on the gap between rural-to-rural, urban-to-rural and urban-to-urban philanthropy, the researchers conclude with a clear message around partnership development between urban doners and rural recipients: “Rural grant recipients, whether they be organizations, individuals or local governments, need the knowledge and skills to seek out and apply for grants. This may be the greater barrier to access funding than geography.”

The final presentation re-enforces this statement, based on evaluations undertaken by the Richmond Fed. One key take-away for local government officials seeking investment in rural places is to look locally first – not necessarily for the actual financing, but for the individuals who have or can learn the skills to manage the process of applying for, monitoring and implementing the projects themselves, including financial and communication skills. A leader, or leaders, from the community needs to shepherd the process, focusing on shared priorities, a pipeline that is developed to clearly keep the projects flowing, and finally, an enabling environment in the local community that supports the project. The bottom line from the evaluations of these projects over the past 15 years is that the community has to have the skills available to absorb and use the capital provided, skills that can be improved via training and support programs. “Local stakeholders will drive what gets built.” The UNC School of Government offers relevant training, such as the courses Community Development Academy and Development Finance Toolbox.

Unfortunately, the evaluations also showed that regardless of training in these areas, and the positive reviews by rural communities who have participated in such training, local leaders still struggle to access what the evaluators termed “the investment ecosystem.” Ultimately, it appears there needs to be both demand side strategies involving local skill building with greater access to supply side capital. In a nod to work already being done to provide an intermediary role, Invest Appalachia, a blended capital impact investing fund headquartered in Asheville, was noted as a positive example of meeting in the middle.