A National Snapshot of Rural Equity Market Innovation

S mall businesses form the foundation of most rural and urban economies. To grow and prosper, these enterprises need access to equity capital as well as the debt capital provided by traditional banking institutions. While debt markets function well in most rural places, rural equity markets tend to be unorganized or nonexistent (RUPRI Rural Finance Task Force). The impetus for the Rural Policy Research Institute’s (RUPRI) Rural Equity Capital Initiative was concern about equity capital availability for rural enterprises and the potentially negative impacts on rural economic development from limited access to equity capital. This project was designed to identify some of the unique features of various equity institutions, describe why they are effective, and suggest how those features might be used in other situations to address rural equity capital needs. This paper provides preliminary information to help articulate the challenges of creating innovative institutions designed to increase access to equity capital for rural entrepreneurs and business owners. The first section provides a brief overview of rural equity markets and the RUPRI project. The second section describes what we have learned so far, specifically, the challenges for equity investing in rural America. The final section discusses other issues that remain to be addressed.