The main obstacle to economic development in many rural areas is a shortage of capital for investment. One source of capital can be a community development financial institution, one of the most important sources of venture capital in poor places. They invest federal and private-sector money in start-ups and other projects in economically disadvantaged communities.

The U.S. has more than 1,000 CDFIs, but “I don’t think they’re very well understood,” said Betsy Whaley, chief strategy officer the Mountain Association, a CDFI for Appalachian Kentucky. “Most projects couldn’t be funded by a traditional bank; banks won’t fund start-ups; they just won’t.”

The role of CDFIs in fighting rural poverty is being explored in a series of articles in Nonprofit Quarterly, co-produced by Partners for Rural Transformation, a coalition of six regional CDFIs in Appalachia, the rural West, Indian Country, South Texas, and the Mississippi Delta.

Read the full article about community development financial institutions by Al Cross at The Rural Blog.