Why do banks struggle to trust rural America with their money? 

This is the question I spent this summer attempting to answer in Whitesburg, Kentucky, with the Letcher County Culture Hub, a group of organizations advancing cultural and economic development in a county where one in four residents lives below the poverty line. Three years prior, the hub had facilitated a half a million dollar investment into a community solar project. That I was surprised at the scale and magnitude of the investment made me frustrated.   

It’s easy to imagine rural communities as tight-knit, easy-going, trust-abundant, and populated with friendly neighbors willing to lend a hand. I lived it for two months. It’s harder to imagine bank loan officers in suits sharing that same trust.  

That’s because to banks, trust is part of a clinical transaction — it has to be formalized or quantified in some way. For financial institutions, a credit history provides that quantification. On its face, credit checks aren’t malicious. They involve verification of financial history, so a bank can see what loans their customer or organization have taken out before, and how they’ve fared with them

But rural communities are systematically excluded from this system. Fifteen percent of rural Americans are “credit-invisible,” meaning they don’t have enough financial history to have a credit score, or their score is based on incomplete information. The national rate of credit invisibility is just 11%. Rural Americans find it harder to access credit-development opportunities than their urban counterparts. 

Payday lenders weaponize communities’ trust by positioning themselves as suitable alternatives to consumer bank loans, offering high-cost loans with exorbitant interest rates. Rural Americans use these services a disproportionate amount, and these loans on average cost an extra $520 simply due to accrued interest

It is absurd that all these downstream effects are the result of traditional financial institutions’ fixation on credit checks. A community could witness first-hand a resident’s sincerity, enthusiasm, and ability in executing a promising idea, one that could lift the community economically. But if that person doesn’t have an adequate credit history, banks kill those dreams.

How can a bank far removed from a community have the righteousness to “know more” about a prospective borrower’s credibility than the people who interact with them daily? 

Traditional financial institutions can do better. They can and should innovate alternatives to the credit check to be more inclusive in their practices. Take the Mountain Association: They’re a Community Development Financial Institution (CDFI) serving Appalachian Kentucky that provides loans to people who have successfully crowdfunded from their community. Their method operationalizes an alternative to credit history that makes use of rural communities’ abundant social credit.  

My time doing community research work with the Culture Hub has convinced me that small organizations in rural communities can be even more aggressive in signaling their credibility to lenders (though this faulty system is not their responsibility to fix). Inspired by the success of the community-wide solar project, I spent this summer interviewing Culture Hub members, lenders, and collaborators. I then implemented a simple mathematical model to supplement these interviews, making the argument that it is in the best interest of both borrowers and lenders for borrowers to position themselves as collaborators in integrated community initiatives in order to attract more rural investment.  

The report that came from these interviews speaks a quantitative language that banks can understand. It supplements the stories and perspectives of the community in Letcher County. It shows how the Culture Hub can be a model for rural community development — if not for individual consumers, for small organizations struggling to receive funding due to the very same credit and credibility shortfalls. 

The full report lives on the Culture Hub’s website. It’s there for local people to use. And perhaps it can also serve as a wake-up call for traditional lenders. It shows that it’s possible to work with historically disinvested communities in a way that speaks to lenders’ bottom lines.  

No statement better encapsulates the importance of the conversation around solving this “trust problem” between lenders and rural America than that of Mohammad Yunus, Nobel Peace Prize winner and the founder of microfinance:  

Financing is a kind of economic oxygen for people. If you don’t give this oxygen to people, people get sick, people get weak, people get non-functional.”  

Disinvestment chokes out rural Americans’ capacity to economically develop. It constricts their economic freedom and prevents them from fully living the lives they want. Finding new ways for borrowers to signal their already-existing credibility is one way to reverse the symptoms. 


Andrew Sun is an undergraduate mathematics and political science student at Duke University. He worked with the Culture Hub during Summer of 2022 as a research intern as part of the Robertson Scholars Leadership Program. The full report on his research is available online. 

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