Community Development Financial Institutions: Invaluable Capital Partners in Low-income Rural Areas

• Author: Jeffrey Mosley
• Date: 01 December 2019
• Published date: 01 December 2019
• DOI: 10.1177/0160323X20928401
• Subject Matter: Articles

Article

Community Development

Financial Institutions:

Invaluable Capital Partners in

Low-income Rural Areas

Jeffrey Mosley

1

Keywords

community development financial institutions, rur al community development, public–private part-

nerships, innovative rural development models, persistent poverty counties, alternative finance

models

Systemic poverty is rooted in urban and rural

areas, exhibiting similar socioeconomic crises,

but with deeper impacts in more remote rural

regions and communities. Rural poverty

declined from 35 percent in the 1960s to 16 per-

cent—where it has held since the early 1980s—

but persistently poor and predominantly minor-

ity counties remain in areas like Appalachia,

the Mississippi Delta, Indian country,

1

and the

Rio Grande (Weber 2019). Recent job losses

in agricultural, manufacturing, and extraction

industries have fueled an outmigration of

working-age and skilled individuals, leaving

behind a struggling and economically deflated

tax base (Drabenstott 2010). As Loabo and

Kelly discuss in this special issue, as tax bases

decline, local governments gradually lose the

capacity to provide services, fund capital

improvements, and engage in economic revita-

lization initiatives.

Economic revitalization and business devel-

opment also require private-sector financing.

But as businesses leave and populations

decrease, persistently poor rural areas lose even

the limited access to sources of financing, such

as traditional banking and grants, that they had

in the past (Green 2018; Parzen and Kieschnick

1992). Indeed, the decline of banks headquar-

tered in rural communities has been more

pronounced than that of banks headquartered

in large and small cities (Tolbert et al. 2018).

The number of small-asset banks fell from

18,000 in 1985 to below 6,000 in 2017 (Wiley

2019). In addition to the resulting bank deserts,

many remote and persistently poor commu-

nities see less investment by foundations and

other grantmaking institutions. Between 2010

and 2014, foundation grantmaking per capita

toSanFranciscoandNewYorkCitywas

US$4,096 and US$1,966, respectively. During

the same period, the Mississippi Delta and Ala-

bama Black Belt received US$41 per capita,

Coal and Lowcountry US$43, and the Rio

Grande Valley received US$52; the U.S. gran-

tmaking average was US$451 (Schlegel and

Peng 2017).

Although no single solution can bridge the

growing wealth and opportunity divide, the

community development financial institution,

or CDFI, holds promise for restoring

1

Jeffrey Mosley Community Development Consulting,

Silver Spring, MD, USA

Corresponding Author:

Jeffrey Mosley, Jeffrey Mosley Community Development

Consulting, Silver Spring, MD, USA.

Email: jeffmosley@rcn.com

State and Local GovernmentReview

2019, Vol. 51(4) 275-282

ªThe Author(s) 2020

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DOI: 10.1177/0160323X20928401

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