Social impact is frequently emphasized as a concept in urban environments, as many multinational companies are headquartered in major urban centres. However, rural areas are often areas where resources are more constrained in terms of investment amounts.

But the partners involved often find that these regions are ripe for opportunity for increased business investment to increase economic prosperity and community well-being. In fact, businesses can convene community organizations, state and local government members, and small and medium-sized enterprise (SME) representatives to better pool expertise and investment, giving them the bandwidth and resources to generate greater revenue. are more likely to have. These companies are more investable than they would be if they acted alone.

At the same time, we can learn from social innovation players who are formerly active in urban areas and are currently working, especially in rural areas, contributing to improving the economic welfare of rural areas.

Community capital creates prosperity in rural communities

Social innovation offers two main ways to bring together partners and resources to provide holistic benefits to rural communities. bill stoddart, co-founder and president of HomeStake.com, which uses finance to promote entrepreneurship and community resilience, says his goal is to connect people and ideas and use catalytic capital to connect investment markets and It says it’s about transforming the way finance works to create opportunities. He creates equity and distributes power. He pools “community capital” through financial instruments from local investors or locally oriented community investors in a particular bioregion, with revenues expected to grow between $1 million and $10 million. Invest in small and medium-sized businesses.

Stoddart explained that small businesses in rural areas are hungry for multiple funding options, especially growth capital, adding that small businesses in third-tier cities and rural areas receive less than 1% of all venture capital.

Consolidation of state and local banks has historically been the primary way small businesses obtain financing, usually through Small Business Administration loans, but over the past 40 years the number of banks in the industry has increased by 10,000 institutions. The number of institutions has shrunk from 1,000 to less than 1,000. While such consolidation may be positive in theory, it leaves significant gaps in capital shortages critical to the growth of local small businesses and key aspects of a thriving middle class outside of U.S. metropolitan areas. .

Stoddart’s argument centers on the idea that economic development and community well-being in a community provides growth capital and equity, and investment from sources that do not control the business or require exit at a fixed period of time. It is said that To meet the needs of investors. Instead, the capital provided by Stoddart’s group grows with the business, delivering returns for investors. It is not targeted at the investor timeline or the fund timeline itself, but rather in line with the organic growth of the business itself.

Leveraging public-private partnerships for thriving rural communities

Another way to benefit rural areas through social innovation is to bring together local and regional actors from the public and private sectors to work together for the benefit of specific rural areas. Josh JacobsonAs CEO of Next Stage Consulting, he is the focal point for doing just this in North Carolina, documenting his methodology and case studies in the company’s materials. 2021 profits and objectives report.

Next Stage works at the intersection of nonprofits, local governments, faith groups, charities, and community-based organizations to create social impact in rural communities. We also specialize in building investments through social innovation and partnerships with community-based organizations by acting as a trust broker that attracts resources outside of our immediate region within a cross-county geographic area. These catalytic public-private partnerships enable synergies by pooling resources that can be quantified by measuring how much activity is generated for every dollar spent.

Next Stage’s typical customers are local private employer companies, typically in the mining, energy, agriculture, and advanced manufacturing sectors. These businesses are a vital foundation for economic prosperity within communities outside of urban areas, and they often have difficult environmental impacts due to the industries in which they operate.

Jacobson said he is seeing increased demand from mid-sized companies operating in older urban areas who want to help build community-based strategies beyond their own efforts. . This demand is being driven by efforts by publicly traded companies to extend their influence in environmental, social and governance (ESG) areas to their suppliers, including other mid-sized companies with local operations. Jacobson said there is no strategy and working in a rural area like this is “a new space and we’re learning as we go.” The lessons learned by Next Stage from our work in rural areas are documented in: ESG appendix Some of its recent reports.

Capitalism and taxation are two great mechanisms for creating a better world, especially for those who are less well-off, and collaboration that leverages local community resources can actually generate more revenue for each dollar. Jacobson explains that it’s a multiplier to increase your productivity. Public money was used.

Similarly, Stoddart believes that a strong and effective middle class is at the heart of a functioning democracy, and deep connections between people who can support themselves and their families, as well as communities. He said he sees part of that as being the ability to work with each other as members of the organization. Of that middle class. “We seek to close the gap by working with one community at a time to develop locally owned and driven community capital,” Stoddart said.