Innovating to fight deep rural poverty

Kentucky Highway 11 winds through Booneville in Owsley County, statistically one of the poorest communities in the country.
Kentucky Highway 11 winds through Booneville in Owsley County, statistically one of the poorest communities in the country. McClatchy-Tribune

Justin Maxson says there’s no real secret about how to create economic development in poor, rural communities, it’s just that it’s “hard, slow and expensive.”

Maxson, who was executive director at MACED (the Mountain Association for Community Economic Development) in Berea before moving on to direct the Mary Reynolds Babcock Foundation in North Carolina, believes a program announced last week in Berea by U.S. Agriculture Secretary Tom Vilsack, will make it a little easier, a lot faster and less costly to do that important work in some of our country’s poorest rural counties.

Uplift America, with its unique lineup of partners, “acknowledges that rural America has got real assets but deep problems and it will take a different alignment to crack through those challenges,” Maxson said.

It’s a sign of how much Kentucky, home to several of the poorest counties in the nation, stands to benefit that, even in these deeply partisan times, U.S. Rep. Andy Barr, R-Lexington, joined the Democratic appointee to praise the program as “an innovative program to attack and fight poverty in a new way.”

A bare-bones description: The USDA is making $401 million available in low-cost, long-term loans to 26 local community organizations to re-lend the money for projects that can help some of the poorest rural counties in the country climb out of their economic troughs.

The program also includes $22 million in philanthropic gifts and Bank of America’s agreement to guarantee the first five years of repayment to provide breathing room for early-stage projects. The Babcock Foundation will manage the fund.

Three Kentucky groups — Community Ventures, Kentucky Highlands Investment Corp. and the Federation of Appalachian Housing Enterprises Inc. — will manage a combined $85 million.

They are CDFIs — community development financial institutions — groups certified by the U.S. Treasury that support projects to alleviate poverty by combining lending with help in economic development, grant applications, project management and other technical areas. “Local people who understand the context and economic realities and the places and can develop the financial solutions for their neighbors,” Maxson explained.

Jerry Rickett, executive director at Kentucky Highlands, which has attracted $261 million in investment to Southeastern Kentucky since 1968, said small towns and counties with part-time mayors and limited staff simply don’t have the time or expertise to seek out many federal programs. “Resources without agents to deploy them often go unused,” he said.

CDFIs provide those agents. They also have an excellent record of loan repayment and a strong record of leveraging grants and other funds for their clients.

Estimates are this program won’t cost the federal government anything (the loan will be repaid) but will likely result in further investment in the affected communities. CDFIs “are uniquely situated to identify projects ... that can make an impact in combating poverty,” Barr said.

Communities that can’t attract private investment or access public funds often spiral into depopulation and deep poverty.

Vilsack recognized that problem as the mayor of a small, rural town in Iowa and as that state’s governor. He’s worked to address it during his almost eight years at the USDA through rural development initiatives.

There is no silver bullet, Maxson said, only “silver BBs,” that, when fired together can yield economic revitalization. Whatever the outcome of next month’s election, the battle to realize the assets of rural America must continue.