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Financial institutions may consider rural communities to be “un-bankable.” But investing in underserved rural areas can be good for business and good for the nation, according to a panel of community development specialists who spoke at conference on rural America.
“One of the challenges we find [within Native American communities] and within rural America … at large is that we tend to be outside of mainstream financial institutions’ purview,” said panelist Chrystel Cornelius, CEO of First Nations Oweesta Corporation. “So we’re really looked at to solve a lot of these problems ourselves.”
Starting a community development financial institution, or CDFI, gave rural advocates like Cornelius a way to serve areas that she says have been “left out of the financial system since inception.” CDFIs like the Oweesta Corporation are private financial institutions that lend in areas that are underserved by commercial financial institutions, usually because the regions are struggling economically.
“My organization has revolved over $27 million in Indian country, and I’ve had one loan of default,” Cornelius said. “We outperform banks.”
Cornelius was one of four speakers featured in a panel on rural development at the May 21 Rural Life in America symposium in Charleston, West Virginia. The event was produced by the Robert Wood Johnson Foundation. (Disclosure: The Robert Wood Johnson Foundation is a supporter of the Center for Rural Strategies, which publishes the Daily Yonder.)
Increasing investment in rural communities faces many challenges, including the fact that one of the nation’s most influential think-tanks argues that rural investment is ineffective. Leaders of the nonprofit Brookings Institution have said repeatedly that public investment in rural areas doesn’t deliver a good return on investment.
Brian Dabson, former director of the Institute for Public Policy at the University of Missouri’s Harry S. Truman School of Public Affairs, disagreed.
“It isn’t the way it works,” Dabson said. “That to me is a narrative coming from a pseudo-intellectual organization supposedly just to the left of center [that] is just unacceptable.”
“We have to better recognize the contributions that rural America makes to the whole,” he said, stating that food, energy, and natural environments are rarely “monetized in a way that benefits rural people.”
Investing in rural areas is about more than just prosperity, Dabson said. It also encourages an economic system that is fairer for all Americans.
“One of the reasons why rural America doesn’t get the resources it needs is because it’s not really at any of the tables where those decisions about resources are made,” he said. “Until we redistribute that power, we’ve got to put a Band-Aid over it and deal with it at the local level and take care of ourselves within that unfair context.”
Regional development organizations like CDFIs represent a unique way for public and private investors to work effectively in rural areas, Dabson said. “They’re across the country, we don’t recognize them well enough, and we don’t invest in them well enough,” he said. CDFIs have “deep local knowledge, combined with access to a broad range of capital from outside.”
Lisa Mensah, CEO of Opportunity Finance and former Under Secretary for Rural Development at the U.S. Agriculture Department, said there is a mature network of CDFIs ready to help the nation invest in rural America. “We’re 30 and 40 years old, and we’re finally at a stage where [a large effort] would work,” she said. “We need to be supported and funded to work, but I often feel like I’m explaining something that’s in place, that’s ready to go, and that needs to flow freely.”
Mensah said federal efforts like the Community Reinvestment Act, which requires banks to invest some of their capital into the communities they serve, have been inadequate. “The banks are not resonant in rural America,” she said. “They don’t have an obligation.”
Rural communities without financial infrastructure have few options except predatory lenders, the panelists said. The situation is “devastating for low-income families really trying to gain a financial footing,” said Cornelius of the First Nations Oweesta Corporation.
The panelists said many CDFIs and other rural initiatives face insufficient funding and a lack of partnerships, leaving them unable to take full advantage of strong local demand. “We’ve been lucky to have two or three conventional banks” as collaborators, Cornelius said. “Our Native CDFIs had an unmet need of $55 million alone.”
But to the panelists, under-served rural communities are more than a business opportunity. The biggest benefit of rural investment might well be the profound change at the community level. “We have built a financial fabric and changed economic landscapes throughout Indian country,” Cornelius said.
Panelist Ines Polonius, CEO of Communities Unlimited, also stressed that the impact of engaging with rural communities extends beyond the monetary return on investment. “It’s not just about the capital, and the unmet demand,” she said. Working with local leaders in rural areas has fostered “leadership skills that allow them to interact and gain some successes, which creates momentum.”
Charlie Zong is a summer intern at the Center for Rural Strategies, which publishes the Daily Yonder.