Rural Development: Availability of Capital for Agriculture, Business, and
Infrastructure (Letter Report, 05/27/97, GAO/RCED-97-109).
Pursuant to a congressional request, GAO examined the availability of
capital in rural America for agriculture, business, and community
infrastructure, focusing on: (1) whether rural borrowers have difficulty
in obtaining access to capital; (2) whether rural borrowers have
adequate knowledge of the availability of financial assistance; and (3)
what potential alternatives may be used to improve the availability of
capital.
GAO noted that: (1) many sources of financial assistance are available
to meet rural areas' demand for capital; (2) while commercial banks and
the Farm Credit System are the primary providers of capital for
agriculture and rural business, rural communities more often turn to the
public sector to obtain capital for infrastructure; (3) most
creditworthy rural business and agricultural borrowers and rural
communities with an adequate tax base generally have little difficulty
in obtaining capital, according to rural officials; (4) however, the
officials GAO surveyed believe that certain borrowers in rural areas,
such as start-up, expanding, and minority-owned businesses and
financially struggling rural communities, have difficulty in obtaining
capital because they lack: (a) equity or collateral, (b) business or
management skills, or (c) an adequate tax base; (5) rural officials
could not quantify the severity of these difficulties, but believe that
economic development in their areas is hindered by these borrowers'
difficulties in obtaining capital; (6) rural development and lending
officials GAO surveyed also believe that potential agricultural and
business borrowers are not always aware of the range of financial
resources available to meet their capital demands; (7) however, these
officials do not believe that this lack of awareness should, by itself,
prevent borrowers from obtaining capital; (8) rural development
officials believe that the primary providers of capital in rural areas
are familiar with alternative sources of funds and can direct borrowers
to these sources; (9) while the extent of rural areas' difficulties in
obtaining capital has not been determined, rural development officials
suggested three proposals to make capital more available in rural areas;
(10) one proposal would use existing loan guarantee programs and
technical assistance entities to target resources to borrowers that are
having difficulty obtaining access to capital; (11) another proposal
would modify the charters of some government-sponsored enterprises to
expand their loan-making authority or require them to lend funds to
borrowers that currently have difficulty in obtaining capital; (12) the
third proposal would allow community-based revolving loan funds financed
with federal dollars to sell their loans into a secondary market; (13)
it is unclear, however, whether the potential benefits of these proposa*
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-97-109
TITLE: Rural Development: Availability of Capital for Agriculture,
Business, and Infrastructure
DATE: 05/27/97
SUBJECT: Capital
Rural economic development
Farm credit
Lending institutions
Business assistance
Business development loans
Government sponsored enterprises
Surveys
Technical assistance
IDENTIFIER: Maine
Alabama
Minnesota
Washington
Farm Credit System
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved. Major **
** divisions and subdivisions of the text, such as Chapters, **
** Sections, and Appendixes, are identified by double and **
** single lines. The numbers on the right end of these lines **
** indicate the position of each of the subsections in the **
** document outline. These numbers do NOT correspond with the **
** page numbers of the printed product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
Cover
================================================================ COVER
Report to the Committee on Agriculture, Nutrition, and Forestry, U.S.
Senate
May 1997
RURAL DEVELOPMENT - AVAILABILITY
OF CAPITAL FOR AGRICULTURE,
BUSINESS, AND INFRASTRUCTURE
GAO/RCED-97-109
Rural Development
(150423)
Abbreviations
=============================================================== ABBREV
CDC - community development corporation
EDA - Economic Development Administration
FCS - Farm Credit System
FHLBS - Federal Home Loan Bank System
GSE - government-sponsored enterprise
SBA - Small Business Administration
USDA - U.S. Department of Agriculture
Letter
=============================================================== LETTER
B-276456
May 27, 1997
The Honorable Richard G. Lugar
Chairman
The Honorable Tom Harkin
Ranking Minority Member
Committee on Agriculture, Nutrition,
and Forestry
United States Senate
Because access to capital is a prerequisite for economic growth, you
asked us to examine the availability of capital in rural\1 America
for agriculture, business, and community infrastructure.
Specifically, you asked that we describe the primary financial
institutions that are used to finance agriculture, rural businesses,
and rural communities' infrastructure, and obtain the views of rural
officials on (1) whether rural borrowers have difficulty in obtaining
access to capital, (2) whether rural borrowers have adequate
knowledge of the availability of financial assistance, and (3) what
potential alternatives may be used to improve the availability of
capital. To address these questions, we spoke with officials of
federal, state, regional, local rural development, and lending
institutions in four states--Alabama, Maine, Minnesota, and
Washington. Additionally, we spoke with officials of federal
agencies and national associations. Furthermore, in October 1996, we
surveyed over 700 officials--members of associations involved in
rural development and officials of the community and economic
development departments in all 50 states--to obtain their views on
the availability of capital in rural areas. The groups and
individuals surveyed were chosen because of their experience in
working with rural lenders and borrowers. Although the survey
respondents were located throughout the United States, their
responses cannot be generalized to all rural localities.
--------------------
\1 For this report, rural refers to locations outside of metropolitan
statistical areas. This definition includes counties containing a
city or an urbanized area with a population of less than 50,000 and a
total area population of less than 100,000.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Many sources of financial assistance are available to meet rural
areas' demand for capital. While commercial banks and the Farm
Credit System are the primary providers of capital for agriculture
and rural business, rural communities more often turn to the public
sector to obtain capital for infrastructure.
Most rural business and agricultural borrowers that are creditworthy
and rural communities with an adequate tax base generally have little
difficulty in obtaining capital, according to rural officials.
However, the officials we surveyed believe that certain borrowers in
rural areas, such as start-up, expanding, and minority-owned
businesses and financially struggling rural communities, have
difficulty in obtaining capital. In their view, these borrowers have
experienced difficulties because they lack (1) equity or collateral,
(2) business or management skills, or (3) an adequate tax base.
Rural officials could not quantify the severity of these
difficulties. Nonetheless, the officials we surveyed believe that
economic development in their areas is hindered by these borrowers'
difficulties in obtaining capital.
Rural development and lending officials we surveyed also believe that
potential agricultural and business borrowers are not always aware of
the range of financial resources available to meet their capital
demands. However, these officials do not believe that this lack of
awareness should, by itself, prevent borrowers from obtaining
capital. Rural development officials believe that the primary
providers of capital in rural areas are familiar with alternative
sources of funds and can appropriately direct borrowers to these
sources.
While the extent of rural areas' difficulties in obtaining capital
has not been determined, rural development officials suggested three
proposals to make capital more available in rural areas. One
proposal would use existing loan guarantee programs and technical
assistance entities to target resources to borrowers that are having
difficulty obtaining access to capital. Another proposal would
modify the charters of some government-sponsored enterprises to
expand their loan-making authority and/or require them to lend funds
to borrowers that currently have difficulty in obtaining capital.
The third proposal would allow community-based revolving loan funds
financed with federal dollars to sell their loans into a secondary
market. It is unclear, however, whether the potential benefits of
these proposals for rural areas would exceed the potential financial
losses to the federal government. Moreover, targeting funds to
borrowers in rural areas that are having difficulty obtaining access
to capital may result in fewer funds being available to creditworthy
borrowers.
BACKGROUND
------------------------------------------------------------ Letter :2
About 2,300 of the 3,100 counties in the United States are classified
as rural. Between 1990 and 1995, the population increased in about
75 percent of these rural counties and decreased in the remaining 25
percent. Growth in rural communities depends in part on the ability
of rural borrowers to obtain capital--both debt and equity--for
development and expansion. Rural firms need access to capital to
start and expand businesses, and rural communities need access to
capital to replace or upgrade aging infrastructure. According to
studies, such as one published by the Federal Reserve Board of Kansas
City,\2 borrowers in rural areas have traditionally had difficulty in
obtaining access to capital, when compared with their urban
counterparts. According to the U.S. Department of Agriculture's
(USDA) Economic Research Service, rural economies are characterized
by a preponderance of small businesses, fewer and smaller local
sources of financial capital, less diversification of business and
industry, and fewer ties to nonlocal economic activity.\3 These rural
attributes may exacerbate businesses' funding difficulties. In
recent years, a number of changes have occurred that could affect the
availability of capital for businesses and communities in rural
areas, such as pressures to reduce government spending and mergers of
small rural community banks with large banks not located in rural
areas.\4
--------------------
\2 Mark Drabenstott, "Capital for Agriculture and Rural America:
Redefining the Federal Role," Economic Review. Vol. 80, No. 3,
Federal Reserve Bank of Kansas City, Third Quarter, 1995. This
article is based on testimony presented to the Senate Committee on
Agriculture, Nutrition, and Forestry on Mar. 31, 1995.
\3 Are Revolving Loan Funds a Better Way to Finance Rural
Development? Economic Research Service Agriculture Information
Bulletin 724-05, (Oct. 1996).
\4 For more information on the issue of bank mergers, see Interstate
Banking: Experiences in Three Western States (GAO/GGD-95-35, Dec.
30, 1994). As noted in the report, according to some bankers and
focus group participants, in three states visited, large banks were
credited with increasing credit availability to those small
businesses that met the large banks' lending criteria. Other bankers
and participants mentioned, however, that the practices of
centralizing and standardizing loan decisions, common to large banks,
could result in some small businesses' having difficulty in obtaining
credit in markets where there are few alternatives to large banks.
WIDE RANGE OF COMMERCIAL
INSTITUTIONS AND GOVERNMENT
PROGRAMS AVAILABLE TO ASSIST
RURAL AREAS
------------------------------------------------------------ Letter :3
Many sources of financial assistance are available to meet rural
areas' demand for capital.\5 Table 1 shows the primary sources of
loans, loan guarantees, equity capital, and grants for business and
agriculture and infrastructure in rural America.
Table 1
Primary Sources of Funding in Rural
America
Type of assistance
----------------------------------------------------------------------
Agriculture and business Community infrastructure
---------------------------------- ----------------------------------
Capital Loan Equity Loan
sources Loans guarantees capital Loans guarantees Grants
-------- ---------- ---------- ---------- ---------- ---------- ----------
Commerci X X
al
banks
Farm X X
Credit
System
USDA X X X X X
Small X X X
Business
Adminis
tration
Other X X X X X X
federal
grant
and
loan
program
s
States' X X X X X X
programs
Insuranc X
e
compani
es
Nonprofi X X
t
communi
ty
develop
ment
corpora
tions
Venture X
capital
entitie
s
Merchant X
s and
dealers
(e.g.,
leasing
/trade
credit)
--------------------------------------------------------------------------------
For agriculture and small businesses, the primary sources of capital
are commercial banks and the Farm Credit System (FCS). The funds
commercial banks use for lending are primarily derived from
customers' deposits and are used for short-term loans.\6 The Federal
Home Loan Bank System (FHLBS) supplies loans (called advances) to its
member banks. In addition, all banks have access to capital from the
Federal Agricultural Mortgage Corporation (Farmer Mac), which
operates in the secondary market. If the banks receive advances or
package their loans and sell them into a secondary market, they can
use the capital they receive to make longer-term loans.
Commercial banks and others can have some of their loans guaranteed
under federal and state loan guarantee programs, such as USDA's and
the Small Business Administration's (SBA) loan guarantee programs for
businesses. For example, USDA's Business and Industry Guaranteed
Loan Program, targeted to rural areas, was funded at $688 million for
fiscal year 1997. To qualify for loan guarantees under these
programs, applicants must be unable to obtain financing elsewhere and
must demonstrate an ability to repay their loan. In addition to
guaranteed loans, USDA provides direct loans targeted to rural
businesses and grants to rural entities that provide financial and
technical assistance to rural businesses. SBA also provides direct
micro-loan financing to small business borrowers using
intermediaries, such as nonprofit community development corporations,
and provides grants to these intermediaries for technical assistance
to their borrowers. Furthermore, USDA participates with other
federal agencies in initiatives such as the Empowerment
Zone/Enterprise Community program and the Pacific Northwest Economic
Adjustment Initiative, which target federal funds to selected
communities.
Like commercial banks, the FCS makes loans to farmers, ranchers,
rural homeowners, agricultural cooperatives, rural utility systems,
and agribusinesses. However, unlike commercial banks, FCS has its
lending authority established by the Congress. As of December 31,
1996, FCS' loan balance was $61.2 billion.
Furthermore, unlike commercial banks, FCS is not a depository
institution. Instead, it is cooperatively owned by its
members--borrowers--who must buy stock in FCS' entities as a
prerequisite for borrowing. FCS' funds for loans are raised through
the sale of bonds and notes in global capital markets and are
frequently used for longer-term loans for agriculture and
agribusiness. FCS, like FHLBS and Farmer Mac, is a
government-sponsored enterprise (GSE).
The Congress created GSEs to help make capital available to certain
sectors of the economy, such as agriculture and housing, in which the
private market was perceived as not effectively meeting capital
demands. While the government has no legal obligation to protect GSE
investors, the federal ties cause these investors to believe that the
federal government would not let the GSE default on its obligations.
As a result, GSEs can borrow at interest rates that are usually only
slightly higher than those paid by the Department of the Treasury.
In addition to commercial banks and GSEs, nonprofit community
development corporations (CDC) are an important source of capital for
business entities that are unable to obtain capital from commercial
banks and FCS. A large number of rural CDCs have been established
since the 1970s. These CDCs are organized as nonprofit entities to
promote economic development in certain target areas by providing a
range of assistance. They provide financing in their service area to
organizations that are unable to obtain commercial or public funds,
most typically by establishing revolving loan funds. In making
loans, CDCs may participate with other entities, commercial or
public, in making loans. Their loan funds are capitalized by grants
and/or long-term, low-interest loans from federal agencies, such as
the Department of Commerce's Economic Development Administration
(EDA); states; and private sources, such as nonprofit foundations and
corporations.
Venture capitalists are another source of funding for agriculture and
businesses in rural areas. Venture capitalists are private investors
and organizations that provide funds and technical and managerial
expertise to help start and maintain new and emerging businesses by
backing entrepreneurs who have financially sound and marketable
ideas. In providing this assistance, venture capitalists seek
partial ownership in the business and a return commensurate with
their assumed risk.
Merchants and dealers--equipment dealers and other suppliers--are
another important source of capital. For these lenders, a borrower's
creditworthiness is of less concern because the credit either is
secured by the value of the asset provided to the borrower or is
protected by a lien against the borrower's business.
For rural communities' infrastructure, such as water and wastewater
systems and roads and bridges, state and local governments are the
principal source of capital. State and local governments finance
infrastructure through taxes, user fees, and bonds. Their funds are
supplemented by federal agencies, such as USDA, which, since 1965,
has provided about $28 billion in grant and loan funds for water and
waste disposal to financially struggling rural communities. Other
sources of federal financial assistance are a large number of
programs in the Department of Housing and Urban Development and EDA.
--------------------
\5 For more detailed information on available programs, see Rural
Credit: Availability of Credit for Agriculture, Rural Development,
and Infrastructure (GAO/RCED-93-27, Nov. 25, 1992).
\6 Generally, any loan with a maturity of 1 year or less is
considered a short-term loan.
RURAL DEVELOPMENT OFFICIALS
REPORT THAT CERTAIN TYPES OF
BORROWERS HAVE DIFFICULTY IN
QUALIFYING FOR CAPITAL
------------------------------------------------------------ Letter :4
Rural development officials we surveyed reported that creditworthy
agricultural and business borrowers and rural communities with an
adequate tax base have little difficulty in obtaining capital.
However, certain types of rural borrowers, such as start-up,
expanding, and minority businesses, as well as financially struggling
rural communities, are finding it difficult to obtain access to
capital, primarily because they do not have adequate equity, business
operating skills, or an adequate tax base. These officials
acknowledged that these types of potential rural borrowers consist of
those that (1) are never likely to meet traditional commercial
lending standards and (2) might be able to meet them. While some
rural officials say that concerns over access to capital have
increased in recent years, they could not quantify the number of
borrowers that have experienced difficulties in obtaining capital.
Most survey respondents noted that the difficulties some borrowers
experience in obtaining capital not only affects the individual
borrowers but also hinders rural communities' economic development.
A number of federal, state, local, and private initiatives have been
developed to increase the availability of capital.
CERTAIN TYPES OF BORROWERS
HAVE DIFFICULTY IN OBTAINING
ACCESS TO CAPITAL
---------------------------------------------------------- Letter :4.1
As shown in table 2, over half of the survey respondents who claimed
to be knowledgeable about rural capital issues reported that start-up
and expanding farms and businesses, minority-led enterprises, and
financially struggling rural communities find it difficult to obtain
debt and equity capital. In addition, according to studies we
reviewed, borrowers that are unlike other local businesses, such as a
software developer in a community that depends primarily on
agriculture, may have difficulty in obtaining capital from local
sources.
Table 2
Percentage of Survey Respondents Who
Believe That Certain Borrowers Have
Difficulty in Obtaining Capital
Percent responding "moderate to very
great difficulty in obtaining
capital"\a
--------------------------------------
Type of borrower Debt\b Equity\c
------------------------------ ------------------ ------------------
Production agriculture
----------------------------------------------------------------------
Beginning farmers 85.7 87.2
Minority farmers 69.8 77.2
Expanding farmers 61.1 71.1
Business
----------------------------------------------------------------------
Start-up 88.6 93.3
Minority-owned 74.5 82.1
Expanding 64.8 75.4
Infrastructure
----------------------------------------------------------------------
Communities 55.2 58.8\d
----------------------------------------------------------------------
Note: Our survey results did not show any significant differences by
geographic region.
\a Percentages are based on the number of respondents who were
knowledgeable or had at least some experience with rural capital
issues. As shown in app. II, fewer respondents were familiar with
production agriculture issues than with business or infrastructure
issues.
\b Debt capital is borrowed funds paid back over time with interest.
\c Equity capital is ownership funds that become part of the capital
base, yielding a return based on the profitability of the business
over time.
\d These represent grant funds, tax revenues, and user fees.
Source: GAO's analysis of questionnaire data.
According to rural development officials we spoke with and the
studies we reviewed, a number of factors account for the difficulties
certain borrowers face. (See bibliography for a listing of the
literature reviewed.) First, the borrowers that are having
difficulties obtaining access to capital, such as beginning farmers
and start-up businesses, lack sufficient equity or collateral to
qualify for debt capital at most banks. Therefore, these borrowers
have to turn to lenders that specialize in providing capital to
higher-risk ventures, such as venture capitalists, for their primary
funding. Similarly, financially struggling rural communities have
difficulty financing their infrastructure requirements because their
declining tax base makes it difficult to incur debt.
Second, those we surveyed and the studies and testimonies we
reviewed, such as a 1995 Washington State Development Finance Report
and a 1996 testimony by a researcher on rural capital markets,
suggest that the lack of business skills is a major impediment for
start-up and expanding businesses. These potential borrowers cannot
effectively prepare sound business and marketing plans, financial
statements, applications, and other documents required to secure the
capital they seek. Likewise, many small communities do not have, nor
can they afford, professional managers who know how to identify and
apply for the financing programs available to the communities and how
to comply with the programs' rules and regulations. In the view of
those we interviewed, many of the traditional lenders do not have the
time or inclination to provide these borrowers with the level of
attention needed to make them successful. Furthermore, even when
dealing with a loan guaranteed by a federal or state guarantee
program such as SBA's, the borrowers are not required by the
guarantor agencies to obtain technical assistance as a precondition
for qualifying for the loan.
Third, borrowers seeking funds for nontraditional businesses may not
be able to obtain capital because commercial banks in rural areas may
be unable or unwilling to evaluate these lending opportunities. For
example, several studies we reviewed reported that while local
bankers may thoroughly understand lending for production agriculture,
they may not have the management expertise to evaluate the
profitability of loans to a software developer.
Finally, several studies, such as the 1995 Washington State
Development Finance Report and a 1993 report on minority and seed
capital, report that some minority borrowers may not be able to
obtain capital, even though they meet commercial lending standards.
Some officials who assist minority agricultural and business owners
have charged that discrimination prevents some minority borrowers
from obtaining capital.
SURVEY RESPONDENTS BELIEVE
THAT PROBLEMS IN OBTAINING
CAPITAL MAY HINDER ECONOMIC
DEVELOPMENT
---------------------------------------------------------- Letter :4.2
The majority of those we surveyed who were familiar with rural
capital issues reported that economic development in rural areas is
at least moderately hindered by the difficulties agriculture,
businesses, and communities face in obtaining capital. Table 3
reports the percentage of respondents who believe that limitations on
the availability of capital hinder rural economic development.
Table 3
Percentage of Survey Respondents
Reporting That Limitations on Capital
Availability Hinder Economic Development
in Rural Areas
Percent responding that economic
development is hindered to a moderate
or very great extent\a
--------------------------------------
Type of borrower Debt Equity
------------------------------ ------------------ ------------------
Production agriculture 57.4 67.6
Business 73.0 78.1
Community infrastructure 64.9 68.6
----------------------------------------------------------------------
\a Percentages are based on the number of respondents who were
knowledgeable or had at least some experience with rural capital
issues. As shown in app. II, fewer respondents were familiar with
production agriculture issues than were familiar with business or
infrastructure issues.
Source: GAO's analysis of questionnaire data.
A January 1997 report by the Rural Finance Task Force of the Rural
Policy Research Institute is consistent with our questionnaire
results.\7 The Institute reported that difficulties in obtaining
access to debt capital present a significant impediment to broadening
the economic base of a rural community.
--------------------
\7 The Current Adequacy of Rural Financial Markets: Rural Economic
Development Impacts of Seven Key Policy Issues. This report was
prepared for the Senate Committee on Agriculture, Nutrition and
Forestry, the House Agriculture Committee, and the USDA. Rural
Policy Research Institute. Columbia, Mo.: Jan. 1997.
INITIATIVES TO HELP INCREASE
CAPITAL AVAILABILITY
---------------------------------------------------------- Letter :4.3
To attempt to overcome the difficulties that potential borrowers
encounter, several initiatives are either planned or ongoing. To
help borrowers that are having difficulty obtaining access to
capital, federal and state governments have set up programs to assist
beginning farmers, start-up businesses, and small communities that
want to fund water and sewer projects. For example, although no
funds have been appropriated, the 1996 farm bill established in USDA
a venture capital demonstration program for rural America. The
program would fund up to 10 venture capital organizations for
community development to provide capital to private business
enterprises.
Similarly, Minnesota created Minnesota Technology, Incorporated, in
1992 with $7 million to provide equity capital to start-up, small,
and expanding businesses located predominantly in rural areas. As of
June 1996, this fund had invested about $2.6 million in 10 firms.
At the local level, hundreds of revolving loan funds have been
established to help start-up and expanding businesses eventually
obtain capital from commercial lending sources. For example, in
Minnesota alone, about 180 community-based revolving loan funds have
been established to provide financial assistance to small rural
businesses.
In Fayetteville, Arkansas, the Community Resource Group,
Incorporated, created a community loan fund in 1992 with funds
primarily from USDA and a major private foundation to provide capital
for water and wastewater projects. The fund's efforts are targeted
to financially struggling small rural communities in seven southern
states. Since 1992, the fund has made 66 loans that have a total
value of over $3.2 million.
Several federal, state, and private programs, such as SBA's Small
Business Development Centers, have been developed to provide
technical assistance to prospective borrowers. However, the majority
of rural development officials we surveyed did not believe that these
programs were sufficient. Our questionnaire showed that 59 percent
of those surveyed believe that the technical assistance provided to
agricultural and business borrowers is marginal or inadequate.
According to several rural development officials we interviewed, this
negative response may be due in part to the fact that technical
assistance resources are insufficient to meet the demand.
Finally, to help minority borrowers, numerous federal and state
programs have been targeted to these borrowers. For example, SBA has
set-aside programs for minority-owned businesses, and states, such as
Alabama, have loan programs targeted to minority-owned enterprises.
RURAL OFFICIALS BELIEVE THAT
MANY POTENTIAL BORROWERS ARE
NOT AWARE OF THE VARIETY OF
FINANCIAL RESOURCES AVAILABLE
------------------------------------------------------------ Letter :5
Many rural development officials we surveyed reported that potential
borrowers were unaware of available financial resources and did not
know how to apply for debt and equity capital.\8 According to these
officials, this was particularly the case for borrowers seeking
assistance for businesses. (See table 4.)
Table 4
Views of Rural Development Officials on
Potential Rural Borrowers' Awareness of
and Knowledge of How to Apply for
Financial Assistance
Percent responding Percent responding
"probably or "probably or
definitely unaware definitely do not
of availability of know how to apply
financial for financial
Type of financing sought assistance"\a assistance"\a
------------------------------ ------------------ ------------------
Production agriculture 47.4 64.1
Business 55.9 70.1
Community infrastructure 31.0 49.7
----------------------------------------------------------------------
\a Percentages are based on the number of respondents who were
knowledgeable or had at least some experience with rural capital
issues. As shown in app. II, fewer respondents were familiar with
production agriculture issues than with business or infrastructure
issues.
Source: GAO's analysis of questionnaire data.
This perceived lack of awareness of financial assistance occurs even
though federal and state agencies and commercial entities have made
considerable efforts to better inform rural public and financial
institutions about available assistance. For example, the federal
government publishes The Catalog of Federal Domestic Assistance,
which details federal assistance programs, and agencies supplement
this publication with information on their own programs.
Similarly, states and commercial entities, such as banking
associations and utility companies, have developed and disseminated
numerous publications to advertise the financial resources and
programs available to assist rural borrowers. They also conduct
outreach workshops, seminars, and other types of meetings to inform
prospective agricultural, business, and community customers of the
sources of available assistance.
According to rural development officials we interviewed, banks and
other capital providers are generally knowledgeable about available
sources of capital and can refer borrowers to these sources. They
also believe that borrowers' need for business operating knowledge is
often greater than their need for more knowledge about how to find
capital. Finally, these officials believe that, in financing
infrastructure, rural areas have great difficulty in discovering the
types of support potentially available and completing the
documentation required to apply and qualify for loan and grant
assistance.
--------------------
\8 For more information on this issue, see Rural Development:
Patchwork of Federal Programs Needs to Be Reappraised
(GAO/RCED-94-165, July 28, 1994).
ALTERNATIVES HAVE BEEN PROPOSED
FOR IMPROVING THE AVAILABILITY
OF CAPITAL IN RURAL AREAS
------------------------------------------------------------ Letter :6
In the view of many rural development officials, including
respondents to our survey, funding for existing federal grant and
loan programs is insufficient to satisfy the potential rural
borrowers not served by available capital sources. However, given
current budgetary constraints, most officials we interviewed believe
that additional federal support is unlikely to be forthcoming.
Consequently, rural development officials proposed three alternatives
that could improve the availability of capital for certain borrowers
that are experiencing difficulty in obtaining capital. While these
alternatives may not require federal appropriations, these officials
acknowledged that these alternatives present risks to taxpayers that
may result in some future costs. These alternatives are (1) using
existing loan guarantee programs and technical assistance entities to
target resources to borrowers having difficulties obtaining access to
capital, (2) expanding the charters of some GSEs and/or requiring
them to target some of their funds to borrowers having difficulties
obtaining access to capital, and (3) authorizing federal agencies
that have provided capital to state- and community-based revolving
loan funds to allow these revolving loan funds to sell their loans
into a secondary market. It is unclear, however, whether the
potential benefits of these proposals for rural areas would exceed
the potential financial losses to the federal government. Moreover,
targeting funds to borrowers in rural areas having difficulty
obtaining access to capital may result in having fewer funds
available to creditworthy borrowers.
We have not performed a detailed analysis of the needs for or merits
of these alternatives because adequate historical information is not
available. However, we discussed their potential benefits,
limitations, and risks with knowledgeable officials in the Department
of the Treasury, FCS, the Farm Credit Administration, and the federal
agencies that initially provided grants to the community-based
revolving loan funds. Each alternative is discussed below.
CHANGING THE FEDERAL LOAN
GUARANTY PROGRAM(S) AND
LINKING THEM TO TECHNICAL
ASSISTANCE
---------------------------------------------------------- Letter :6.1
Rural development and lending officials we interviewed suggested that
existing loan guarantee programs, such as SBA's Business Loan
Guarantee Program, be modified to require that a small percentage of
their guaranteed loan funds be targeted to those borrowers that are
having difficulties obtaining access to capital, such as start-up and
expanding businesses. This program change would require that
guarantor agencies apply less stringent lending standards to these
applicants. However, because of the higher risk associated with
these borrowers, the officials suggested that loan approval be
contingent on a borrower's agreeing to work closely with a technical
assistance provider, such as SBA's Small Business Development
Centers. Technical assistance has been beneficial in other loan
programs. For example, revolving loan fund officials told us that
they have been able to reduce their loan default rates by providing
extensive technical assistance.
We identified two consequences of applying less stringent lending
standards. First, the risks of financial losses to the federal
government could increase. Second, because a share of funds would be
targeted to borrowers in rural areas having difficulty obtaining
access to capital, fewer funds might be available for guaranteed
loans to creditworthy borrowers.
In commenting on a draft of this report, SBA stated that it believes
that insufficient resources are available to meet the technical
assistance needs of rural America's small businesses. To ensure that
borrowers needing technical assistance are aware of its partners'
services and locations, SBA currently notifies all its guaranteed
loan recipients of the services and location of its nearby technical
assistance partners. However, given the limited funding currently
available to the Small Business Development Centers, SBA believes
that this alternative's requirement that all borrowers receive
technical assistance would not be cost-effective.
CHANGING FEDERAL
GOVERNMENT-SPONSORED
ENTERPRISES
---------------------------------------------------------- Letter :6.2
Rural development and lending officials we interviewed told us that
the charter of FCS and the FHLBS could be revised to expand the
availability of capital in rural America. While these proposals may
have merit, they also have limitations.
The ideas proposed for revising FCS include (1) providing capital to
nonagricultural businesses and/or (2) requiring that a certain amount
of FCS' portfolio include loans to borrowers that have encountered
particular difficulty in obtaining access to capital, such as
beginning farmers; start-up and expanding businesses; and small,
financially struggling rural communities. FCS has also proposed
legislation that would give it authority to provide capital to
nonagricultural businesses. However, this proposed legislation did
not seek authority for targeting loans to borrowers that have
encountered difficulties in obtaining access to capital.
According to rural development officials, both ideas have merit
because FCS has an important presence in rural America, with 1,476
offices and more than 80 years of experience in serving agriculture
and agriculture-related cooperative business entities. Furthermore,
FCS already has access to global capital markets.
However, according to officials we spoke with, these two ideas
present some financial risk to the federal government. Allowing FCS
to lend to nonagricultural businesses may increase its exposure to
losses because its loan officers may not have the expertise necessary
to evaluate the risks associated with business or infrastructure
projects unrelated to agriculture. FCS officials acknowledge the
limitations of their current staffing but believe that they could
overcome this limitation by developing or hiring the staff needed to
implement any new authority.
A proposal that a certain amount of FCS portfolio include loans to
borrowers that have had difficulties in obtaining capital also
presents financial risk to the federal government because it would
increase the FCS' exposure to losses. Additionally, targeting a
share of FCS' funds to borrowers having difficulty obtaining access
to capital may result in fewer funds being available to lend to
creditworthy borrowers. Furthermore, FCS may be reluctant to make
such loans because doing so conflicts with regulatory requirements to
ensure that funds are loaned to borrowers that are likely to repay
their loans.
Similarly, the rural development and lending officials' proposed
revision to the charter of FHLBS would have limitations. The
proposed revision would expand FHLBS' authority beyond providing
advances to members for home mortgages to include providing advances
for loans for rural development activities, such as financing smaller
businesses and communities' infrastructure. This proposal also
raises concerns about exposure to loss, lack of expertise in
evaluating loan applications outside the historical experience of
FHLBS and its member institutions, and potential unwillingness to
lend to higher-risk borrowers. In addition, fewer funds may be
available to borrowers that have traditionally borrowed from FHLBS'
member institutions.
The proposal to revise FHLBS is similar to changes specified in H.R.
3167, "The Enterprise Resource Bank Act of 1996," which we examined
in a June 1996 letter to the Chairman of the House Committee on
Banking and Financial Services.\9 We concluded that the proposed
mission is broader than FHLBS' original mission, which focused the
GSE's activity on a specific sector of the economy that the Congress
perceived as being characterized by some degree of market failure.
We concluded that the broader mission, expanded membership, and
additional eligible collateral proposed under the bill could lead to
an increase in taxpayers' exposure to risk because the proposal is
likely to lead to expanded activities by FHLBS. We also noted that
the government would have little assurance that FHLBS would use this
expanded authority to actually channel significant amounts of
additional credit to the new mission-related activities.
Our concerns over the potential risk to taxpayers of expanding the
role of GSEs are not new. In a December 1993 report on FHLBS,\10 we
developed criteria to be used in judging whether such activities are
appropriate. Among these criteria are (1) the new activity should be
consistent with the FHLBS' mission, (2) the GSE should have the
expertise needed for the new activity, and (3) any new activity
should be properly priced after any risk adjustments. According to a
Department of the Treasury official, the expansion of GSEs raises a
broader policy question about whether GSEs should be used solely to
correct for market imperfections or also to subsidize credit to
borrowers that would not obtain credit in the private market.
--------------------
\9 Enterprise Resource Bank Act (GAO/GGD-96-140R, June 27, 1996).
\10 Federal Home Loan Bank System: Reforms Needed to Promote Its
Safety, Soundness, and Effectiveness (GAO/GGD-94-38, Dec. 8, 1993).
ALLOWING THE SALE OF
FEDERALLY SUBSIDIZED
COMMUNITY DEVELOPMENT LOANS
---------------------------------------------------------- Letter :6.3
Officials we interviewed, as a well as a 1991 study by the Federal
Reserve Bank of Kansas City, have proposed creating secondary markets
for rural businesses and community infrastructure loans as a way of
increasing capital availability in rural areas while allowing market
forces to operate.\11 Under this proposal, rural, community-based
revolving loan funds would be able to sell their loans into a
secondary market, thereby making funds currently tied up in existing
loans available for new loans. Figure 1 shows the flow of funds from
revolving loan funds through an intermediary that packages the loans
for sale to investors in the secondary market.
Figure 1: Flow of Funds from
Revolving Loan Funds Through an
Intermediary to Secondary
Market Investors
(See figure in printed
edition.)
While some rural, community-based revolving loan funds now sell into
a secondary market, most do not. The revolving funds that do not
sell into a secondary market are often partially capitalized with
federal funds that cannot be sold at a discount from face value
unless the managers of the revolving funds receive permission from
the concerned federal agencies. USDA officials told us that even
though selling these loans into a secondary market could make more
funds available, they hesitate to provide permission because of the
potential adverse public reaction to selling federally subsidized
loans at less than face value.
According to rural development officials, allowing the sale of
federally subsidized community development loans could make a
substantial amount of additional capital available to rural areas.
Studies by EDA and a privately sponsored secondary market entity
state that funds invested in economic development loans might be
freed up for further investments. According to an official of a
privately sponsored secondary market entity, these loans would
represent a major untapped source of potential financing for
community development initiatives across the country if they were
sold in a secondary market. For example, a privately sponsored
survey of revolving loan funds in 15 states identified more than
24,000 economic development loans, totaling more that $1.2 billion.
According to EDA, another study suggested that as much as $6 billion
in economic development loans may be available for sale in a
secondary market.
However, according to the official of the privately sponsored
secondary market, uncertainty exists about whether this secondary
market proposal would be successful without federal financial
assistance. This uncertainty occurs because revolving loan funds
make some loans at less than market rates and/or for more lengthy
terms to certain borrowers. Therefore, because of the additional
risk and the lack of higher interest rates to compensate investors
for this risk, these loans would have to be purchased at a discount
so that investors could earn a return that is competitive with
current market rates. This discount would have to be subsidized by
either the private or public sector, or both, in order to encourage
revolving loan funds to sell these loans. According to this
official, if the private sector is unwilling to provide these funds,
a federal subsidy might be required.
Another limitation of this proposal, according to some rural
officials, is that revolving loan fund managers might be reluctant to
sell more of their loans to a secondary market. Currently, these
managers rely primarily on an infusion of capital from federal and
state government, foundations, and charitable contributors to make
new loans. Managers we interviewed said that they are reluctant to
sell their loans because they need the income from their existing
loan portfolio to fund their administrative expenses.
Furthermore, rural development officials expressed concerns about the
adequacy of revolving loan funds' loan-making and -servicing
practices and the existence of an active demand for capital from
these institutions, which are funded in part by federal agencies,
such as USDA and EDA. They told us that many of these revolving loan
funds may not have sufficient management expertise to evaluate the
risk associated in lending to borrowers that cannot obtain capital
from traditional sources or meet demand for capital and technical
assistance. A potential benefit of a secondary market of this type
may be its ability, over time, to develop information on the
performance of revolving loan funds. This information could be
useful in evaluating whether federal financial assistance to these
entities should be continued.
In commenting on our draft report, USDA noted that, in support of
this concept, it is considering providing additional capital in rural
areas through a demonstration project that would allow the sale of
third-party recipient loans by lenders in the Department's
Intermediary Relending Program. Under this program, USDA lends funds
to intermediaries, that, in turn, provide loans to recipients who are
developing business facilities or community development projects in
rural areas. Eligible intermediaries include public bodies,
nonprofit corporations, Indian tribes, and cooperatives.
EDA, in commenting on the draft report, stated that while it is aware
of the drawbacks and barriers associated with the development of a
secondary market, it is eager to further explore securitization by
pursuing a demonstration program involving the sale of securities in
a secondary market. EDA believes that the risks related to such a
demonstration are more than offset by the potential to accelerate the
development of a secondary market for economic development loans and
the benefits of private investment in economic development lending
programs. Accordingly, EDA, pursuant to discussions with Treasury
officials and other agencies that sponsor revolving loan fund
programs, and in consultation with congressional oversight
committees, is poised to undertake a demonstration of actual
securitization transactions.
In seeking to demonstrate securitization, EDA reported that it plans
to allow the transactions to occur without influencing the pricing of
the transactions--that is, EDA is not planning to permit its funds to
be used for credit enhancement or other schemes designed to influence
the pricing of the transactions. In this way, EDA hopes that the
demonstration will reveal the true value of economic development
loans and give a realistic picture of the investor community's
interest in seeking out loan-backed securities for economic
development.
--------------------
\11 Regional Economic Development and Public Policy, Federal Reserve
Bank of Kansas City, May 1991.
AGENCY COMMENTS
------------------------------------------------------------ Letter :7
We provided copies of a draft of this report to USDA, SBA, and the
Department of Commerce for their review and comment. Their comments
and our responses are in appendixes III, IV, and V.
In commenting on the draft report, USDA noted that its Rural
Business-Cooperative Service programs, while relatively small when
compared with SBA's programs, are, in some localities, the only
source of federal funding for business and economic development
activities. With respect to the alternative proposed by rural
development officials to allow the sale of federally subsidized
community development loans in a secondary market, USDA stated that
it is currently developing a memorandum of agreement to initiate a
demonstration project that will allow the sale of loans into a
secondary market. We incorporated USDA's comments into our report
where appropriate.
SBA, in commenting on the draft report, agreed that certain borrowers
in rural areas, such as start-up, expanding, and minority-owned
businesses have difficulty in obtaining capital, and stated that, in
some areas, insufficient resources are available to meet technical
assistance requirements. SBA noted, however, that given its limited
funding for technical assistance, SBA's approach of notifying
borrowers of available services and locations is significantly more
cost-effective than requiring that all borrowers receive technical
assistance as a condition of receiving a loan. We incorporated these
comments where appropriate.
In commenting on the draft report, the Department of Commerce's EDA
stated that the report did not provide a balanced assessment of the
potential for secondary marketing of economic development loans. EDA
stated that the potential benefits of developing such a secondary
market outweigh the possible shortcomings. In our report, we discuss
both potential benefits and limitations of the alternatives and do
not take a position on this matter. We incorporated EDA's comments
where appropriate.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8
We conducted our review from May 1996 through April 1997 in
accordance with generally accepted government auditing standards.
Our scope and methodology are discussed in detail in appendix I. The
reports we reviewed concerning rural capital are listed in a
bibliography.
---------------------------------------------------------- Letter :8.1
As agreed with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days from the date of this letter. At that time, we will
send copies of this report to the House Committee on Agriculture,
other interested congressional committees, the Secretaries of
Agriculture and Commerce, and the Administrator of SBA. We will also
make copies available to others upon request.
If you have any questions about this report, please call me at (202)
512-5138. Major contributors to this report are listed in appendix
VI.
Robert A. Robinson
Director, Food and
Agriculture Issues
SCOPE AND METHODOLOGY
=========================================================== Appendix I
To describe the primary financial institutions that are used to fund
rural agriculture, business, and infrastructure, we reviewed the
literature on economic development in rural America and obtained
information from federal, state, and local officials concerned with
rural development.
To obtain the views of rural officials on potential borrowers'
awareness of the sources of finance, the availability of capital, and
possible legislative proposals for closing identified gaps, we sent a
questionnaire to over 700 rural development officials who are members
of the National Association of Development Organizations; the
National Association of Regional Councils; and the agricultural and
rural affairs steering committee of the National Association of
Counties. We also surveyed all 50 state departments of community and
economic development, or their equivalents.\1 Our survey
questionnaire was designed to obtain information on rural capital
issues for production agriculture, businesses, and community
infrastructure. We did not include commercial banks and the Farm
Credit System in our survey because surveys performed by others had
included these traditional suppliers of capital.
Before mailing our questionnaires, we solicited expert review to
determine the validity of the instrument by pretesting a preliminary
version on officials from selected state, local, and other community
organizations of varying size and in different parts of the United
States. We pretested in four cities: Richmond, Virginia; Jackson,
Mississippi; Boise, Idaho; and Indianapolis, Indiana. On the basis
of the comments from these four pretests, we revised the
questionnaire so that the questions would be uniformly interpreted
and understood. Once we were confident that the questionnaire was
free of any design flaws, we conducted a first mailing to officials
from state, local, and community organizations.
The officials were given approximately 10 days to complete and return
the questionnaire. After a 2-week period, we sent out a "follow-up"
letter to those recipients who had not yet returned their
questionnaire. After another 2-week period, if questionnaires were
still not returned, we mailed reminder postcards requesting the
return of the questionnaires.
We edited the returned questionnaires to ensure that they were
complete and filled out correctly. The questionnaire data were then
converted into electronic data for statistical analyses.
We received responses from about 67 percent of those surveyed. In
presenting the survey results, we only included the responses from
those who claimed at least some experience in agriculture, business,
or community infrastructure, which accounted for about 74 percent of
those returning the questionnaire. Our survey results are shown in
detail in appendix II.
We also interviewed rural development officials in four
states--Alabama, Maine, Minnesota, and Washington. These officials
included bankers and representatives of community development
organizations; venture capitalists; members of the rural finance task
force of the Rural Policy Research Institute; and representatives of
federal and state governments.
Furthermore, we interviewed officials of federal agencies in
Washington, D.C., that provide capital to rural America. These
agencies included USDA, the Department of Commerce's Economic
Development Administration (EDA), and the Small Business
Administration (SBA). We also interviewed officials of national
associations in Washington, D.C., that represent the interests of
businesses, farmers, lenders, developmental organizations, and local
communities across the country. These associations included the
American Bankers Association, Independent Bankers Association of
America, Farm Credit Council, Farm Credit Administration, National
Federation of Independent Businesses, National Small Business United,
the American Farm Bureau Federation, the National Farmers Union, the
National Association of Development Organizations, the National
Association of Regional Councils, the National Association of
Counties, the Council of State Community Development Agencies, and
the National Association of Towns and Townships.
(See figure in printed edition.)Appendix II
--------------------
\1 The National Association of Development Organizations' goals
include promoting economic development, focusing primarily on rural
areas and small towns and providing technical assistance to its
members. These members are drawn primarily from multicounty planning
and development agencies. The National Association of Regional
Councils' principal mission is advocacy on behalf of regional
councils, both rural and urban, at the national level. The National
Association of Counties provides research and reference services for
county officials and represents county officials at the national
level.
SUMMARY OF RESPONSES TO
QUESTIONNAIRE TO RURAL DEVELOPMENT
OFFICIALS
=========================================================== Appendix I
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)Appendix III
COMMENTS FROM THE U.S. DEPARTMENT
OF AGRICULTURE
=========================================================== Appendix I
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO comments on the U.S. Department of
Agriculture's (USDA) letters dated April 21-25, 1997.
GAO COMMENTS
--------------------------------------------------------- Appendix I:1
1. We have added more detail on USDA's financial and technical
assistance programs that are targeted to rural areas for business and
economic development.
2. USDA included some attachments that provided additional detailed
information about specific agency programs. We have not included
these attachments in the report.
3. We have revised the report to recognize that USDA plans to
conduct a demonstration project allowing the sale of loans to
third-party recipients.
4. We recognize that certain restrictions exist with respect to the
sale of tax-exempt bonds to finance community infrastructure needs.
However, a complete discussion of this issue is beyond the scope of
this report.
(See figure in printed edition.)Appendix IV
COMMENTS FROM THE SMALL BUSINESS
ADMINISTRATION
=========================================================== Appendix I
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO comments on the Small Business Administration's
(SBA) letter dated April 18, 1997.
GAO COMMENTS
--------------------------------------------------------- Appendix I:2
1. We have revised the report to recognize that SBA officials
believe that, given the limited funding currently available,
requiring that all borrowers receive technical assistance would not
be as cost-effective as the practice of notifying guaranteed loan
recipients of the services that are available.
(See figure in printed edition.)Appendix V
COMMENTS FROM THE DEPARTMENT OF
COMMERCE
=========================================================== Appendix I
(See figure in printed edition.)
The following are GAO comments on the Department of Commerce's
Economic Development Administration's (EDA) letter dated May 6, 1997.
GAO COMMENTS
--------------------------------------------------------- Appendix I:3
1. The report recognizes both the potential benefits and limitations
of the alternatives. We revised the report to recognize that EDA
officials believe that the potential benefits of developing secondary
markets for economic development loans outweigh the possible
shortcomings.
2. We revised the report to recognize that EDA officials plan to
explore secondary markets by pursuing a demonstration program
involving the sale of loans into secondary markets.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI
Robert C. Summers, Assistant Director
Dale A. Wolden, Evaluator-in-Charge
James L. Dishmon, Jr.
Kelly S. Ervin
William F. Mayo
Mary Jane Meek
Carol Herrnstadt Shulman
John C. Smith
BIBLIOGRAPHY
=========================================================== Appendix 0
1995 Development Finance Report. Washington State Lenders Network.
1995.
1996 Annual Report. Community Reinvestment Fund. Minneapolis, Minn:
1996.
Agricultural Income and Finance: Situation and Outlook Report.
Annual Lender Issue. U.S. Department of Agriculture, Economic
Research Service. 1996.
Are Revolving Loan Funds A Better Way To Finance Rural Development?
USDA, Economic Research Service, Agriculture Information Bulletin,
No. 724-05. 1996.
Armstrong, Judy, et al. Rural Economic Development: A Profile of
Eight Rural Areas Located in the Lower Mississippi Delta Region.
Federal Reserve Bank of St. Louis, Community Affairs Department.
1995.
Barry and Associates. Agency Market Funds, Commercial Banks, and
Rural Credit. Study prepared for the Farm Credit Council. 1995.
Barry, Peter J. The Effects of Credit Policies on U.S. Agriculture.
AEI Studies in Agricultural Policy. Washington, D.C.: American
Enterprise Institute, 1995.
_____, Bruce J. Sherrick, and Paul N. Ellinger. Farmer Mac's New
Environment: Key Issues and Performance Factors. U. of Illinois,
The Center for Farm and Rural Business Finance. Champagne-Urbana,
Il.: 1996.
Bugbee, Anton, and Associates. Business Capital Needs in Greater
Minnesota. Draft report prepared for Minnesota Technology, Inc.
1996.
Can Federal Action Improve Efficiency in the Market for Farm Loans?
USDA, Economic Research Service, Agriculture Information Bulletin No.
724-01. 1996.
Cole, R., et al. Financial Services Used by Small Businesses:
Evidence from the 1993 National Survey of Small Business Finances.
Federal Reserve Bulletin. 1995.
Credit Availability for Small Businesses and Small Farms. Submitted
by the Board of Governors of the Federal Reserve System. 1993.
Deller, Steven C., and Norman Walzer. Rural Roads and Bridges:
Management Issues Facing Local Highway Officials. USDA, Agricultural
Marketing Service. 1996.
Dewar, Margaret E. "Loans to Business to Encourage Rural Economic
Development." Policy Studies Journal, Vol. 20, No. 2 (1992), pp.
230-43.
Drabenstott, Mark. "Capital for Agriculture and Rural America:
Redefining the Federal Role." Federal Reserve Bank of Kansas City.
Economic Review, Vol. 80, No. 3. (1995).
_____. Regional Economic Development and Public Policy. Federal
Reserve Bank of Kansas City. Kansas City, Mo.: 1991.
_____ and Tim R. Smith. "The Changing Economy of the Rural
Heartland. Economic Forces Shaping the Rural Heartland. Federal
Reserve Bank of Kansas City. Kansas City, Mo.: 1996.
Duncan, Marvin, et al. The Current Adequacy of Rural Financial
Markets: Rural Economic Development Impacts of Seven Key Policy
Issues. U. of Missouri, Rural Policy Research Institute. Columbia,
Mo.: 1997.
Duncan, Marvin, Laurence Crane, and Cole Gustafson. "North Dakota's
Development Bank." Choices (1995), pp. 38-40.
Duncan, Marvin, and Mark Edelman. Rural Finance Reform: A Rural
Community Perspective. U. of Missouri, Rural Policy Research
Institute. Columbia, Mo.: 1995.
Eisinger, Peter. "Review Essay--The State of State Venture
Capitalism." Economic Development Quarterly, Vol. 5, No. 1 (1991),
pp. 61-76.
Evaluation of Wisconsin's Entrepreneurial Assistance Network.
Wisconsin Department of Development, Division of Economic
Development. Madison, Wis.: 1995.
Flora, Jan L., et al. From the Grassroots: Case Studies of Eight
Rural Self-Development Efforts. USDA, Economic Research Service,
Agriculture and Rural Economy Division. 1993.
Gustafson, C., and Sara Anderson. "Credit Rationing of North Dakota
Agribusiness." Journal of Agribusiness, Vol. 13, No. 2 (1995), pp.
99-121.
Harris, Jerold L. Testimony of the President and Chief Executive
Officer of the Farm Credit Bank of Wichita before USDA. Nov. 1,
1995.
Keeton, William R. "Do Bank Mergers Reduce Lending to Businesses and
Farmers? New Evidence from Tenth District States." Federal Reserve
Bank of Kansas City. Economic Review, Vol. 81, No. 3. (1996).
Lamberson, Morris, and Clint Johnson. "Financing Experiences of
Small Manufacturers in Arkansas: Survey and Analysis." Economic
Development Review (Spring 1992), pp. 62-66.
Markley, Deborah. Availability of Capital in Rural America:
Problems and Options. Report prepared with support from the W.K.
Kellogg Foundation and the Ford Foundation. 1992.
_____. White Paper on Rural Financial Markets. Policy Research
Group. Chapel Hill, N.C.: 1995.
A Minority and Seed Capital Program. Prepared for the
Benton-Franklin Counties Governmental Conference, Washington State,
1993. National Development Council. Washington, D.C.: 1993.
Moss, L., P. Barry, and P. Ellinger. Financing Agriculture:
Competitive Challenges for Commercial Banks. U. of Illinois, Center
for Farm and Rural Business Finance. Champagne-Urbana, Il.: 1996.
Mt. Auburn Associates. Capital Availability for Small Business in
Washington: Executive Summary. Somerville, Mass.: 1989.
_____. Financial Markets and Small Business Finance in Washington
State: Final Report. Somerville, Mass.: 1989.
New Tools for Commercial Banks in Rural America. American Bankers
Association, Rural Economic Development Task Force. 1994.
O'Hare, William. "People With Multiple Disadvantages Live in Rural
Areas, Too." Rural Development Perspectives, Vol. 9, No. 2.
(1994).
A Path to Smarter Economic Development. National Academy of Public
Administration. Washington, D.C.: 1996.
Patton, W. David, and Jeffery Duggan. "Surveys Reveal Differences
in Capital Availability between Rural and Urban Idaho." Small Town
(July-Aug. 1990).
Paulson, JoAnn. "Essays in Rural Economics: New Business Finance
Problems in Rural Minnesota--Real or Imagined." Minnesota
Agricultural Economist, No. 659 (1989).
Petersen, Christi. Minnesota Women-Owned Businesses: An Analysis of
Access to Capital. Minnesota Department of Trade and Economic
Development. 1995.
Radin, Beryl A. "State Rural Development Councils Are Creating
Public-Private Partnerships." Rural Development Perspectives, Vol.
11, No. 2. (1996).
Report to Congress on Credit in Rural America. USDA, Economic
Research Service (Apr. 1997).
Rural Conditions and Trends: Federal Programs. USDA, Economic
Research Service, Vol. 7, No. 2. 1996.
Rural Conditions and Trends: Financial Institutions. USDA, Economic
Research Service, Vol. 6, No. 2. 1995.
Rural Conditions and Trends: Rural Trends in the Early 1990's.
USDA, Economic Research Service, Vol. 6, No. 1. 1995.
Rural Conditions and Trends: Socioeconomic Conditions. Economic
Research Service, Vol. 7, No. 3. 1996.
Ryckman, Scott. "Survey of Agricultural Credit Condition." Regional
Economic Digest, Vol. 7, No. 4 (1996), pp. 6-9.
Small Business Lending in Washington. 1995 ed. Small Business
Administration, Office of Advocacy. Washington, D.C.: 1996.
Small Business Lending in Minnesota. 1995 ed. Small Business
Administration, Office of Advocacy. Washington, D.C.: 1996.
Stinson, Thomas F., and Margaret Dewar. "Strategies for Economic
Development." EURA Reporter, Vol. 25, No. 2 (1995).
_____ and Andrea Lubov. "Minnesota's Nonmetro Cities Use Revolving
Loans as a Development Tool." Rural Development Perspectives, Vol.
8, No. 2. (1993).
_____ "Revolving Loan Funds: Funding Economic Development in
Non-Metro Cities." Minnesota Agricultural Economist, No. 669 (1992).
Sullivan, D., and Ann P. Ziebarth. Is Bigger Better? Financial
Sector Concentration and Rural Community Reinvestment. U. of
Wisconsin. Madison, Wis.: 1996.
Survey of Small and Mid-Sized Businesses. Arthur Andersen's
Enterprise Group and National Small Business United. 1995.
Writing and Administering Development Loans: A Workbook and
Reference Guide. Community Reinvestment Fund. Minneapolis, Minn.:
1995.
*** End of document. ***