LOS ANGELES, CA--(Marketwire - Jun 27, 2012) - The Rio Grande Valley of Texas is one of the poorest regions in the United States. More than one-third of the population lives in poverty, and access to capital and credit -- necessary to create economic opportunity -- is severely limited. Meanwhile, investors with plenty of capital struggle to find new opportunities to earn even modest returns in today's low-interest-rate environment. Now, a diverse group of leaders has come up with some potential solutions that could help.
The challenges faced by both the Rio Grande Valley and investors can be addressed by innovations that bring together Wall Street and Main Street, according to "Increasing Access to Capital in the Rio Grande Valley," a new report by the Milken Institute. The report identifies barriers -- including lack of infrastructure and traditional lenders' misperception that residents present too great a risk -- and goes on to suggest a number of policy and financial innovations that can move capital off the sidelines and help the Valley break out of poverty, including:
- Establish a regional leadership council in the Rio Grande Valley
- Promote education at all levels, from job training to personal finance
- Continue and expand federal programs that provide additional capital to communities
- Deploy the next generation of program-related investments by foundations -- typically in the form of below-market loans or credit guarantees and equity investments
- Jumpstart the activity of the Rio Grande Valley Multibank, which comprises a number of financial institutions and can offer a loan pool
- Attract new investors through a securitized loan product
- Create public-private partnerships to make equity investments and/or provide later-stage financing
The report summarizes the proceedings and findings of the Financial Innovations Lab® the Institute held last October in Weslaco, Tex., with support from the Ford Foundation. Labs are pop-up "think tanks" that convene investors, business development non-profits, bankers, academics, and policy activists to focus on an issue. The solutions from the Lab, though developed with the Rio Grande Valley in mind, can also be applied to other capital-starved regions.
"Regional economic growth is predicated on increasing access to capital -- especially for immigrant communities and people living in colonias in South Texas," said Lisa Davis, program officer of the Ford Foundation. "While the challenges are many, the people in the Rio Grande Valley have a drive to succeed and an entrepreneurial spirit that can lead to innovation and greater regional prosperity for all when matched with the right kinds of capital."
According to the Lab report, leveraging the work of market participants in the region -- from philanthropy to government to community investors -- will require more coordination to create both financial and policy incentives to attract new forms of funding to the region. Through innovations such as public-private partnerships, philanthropic investments, and scaled community development programs, the region can see increased access to capital for development, including affordable housing and entrepreneurship.
For the Texas Lab, the Institute brought together community leaders, housing advocates, government officials and academics to identify innovative policy and investment approaches that can provide the returns investors desire while offering communities a path to jobs, decent housing and economic growth. Among Lab participants were representatives of ACCION Texas, Affordable Homes of South Texas, CDC Brownsville, Community Resource Group, EDCO Ventures, Homewise, McAllen Economic Development Corporation, Multicultural and Affordable Lending, Chase North American Development Bank, Proyecto Azteca, The University of Texas Pan-American, U. S. Department of Agriculture, and the U. S. Department of Housing and Urban Development.
Following the Lab, participants established a coalition devoted to coordinating economic development across the region.
Copies of "Increasing Access to Capital in the Rio Grande Valley" are available for download at http://www.milkeninstitute.org/publications/publications.taf?function=detail&ID=38801337&cat=finlab.
About the Milken Institute
A nonprofit, nonpartisan think tank, the Milken Institute believes in the power of capital markets to solve urgent social and economic challenges. Its mission is to improve lives around the world by advancing innovative economic and policy solutions that create jobs, widen access to capital and enhance health.