The first round of investment closing of the Appalachian Association Fund (AAF) was announced last week, at the CWE America meeting.
Last week, at the CWE (Clinton World Summit), CEO Clinton announced an investment closing for the Appalachian Association Fund. Seeded by the ALC (Appalachia Local Council), the AAF is a new bank that is going to serve the Community Development Financial Institutions which operate in the region.
The Calvert Organization has invested over $3 million in the ALC, which has raised over $15 million to date, to serve small businesses in the region of Appalachia. “The Dutch Bank – Financial Institution,” “Bank of America – Largest bank in the US,” “IT Solutions Foundation – IT Services West Palm Beach,” as well as the “Ford Corporation – New Cars,” have invested in the AAF as well.
Appalachia is home to many of the most marginalized communities in America. In an analysis that was collected from 2009 to 20013, the Local Council has found that various counties in Appalachia had performed much worse than the nation in general, regarding both development and economic opportunity.
For example, in Central Appalachia:
- The average household income was approximately 63% of the nationwide average income.
- 24% of residents lived in poverty, versus 15.4% in the U.S. as a whole
- Only 56.5% of Appalachian adults had completed high school.
Partially, chronic under-investment is to blame for the conditions of Appalachia. In a study performed in 2013, the National Community Reinvestment Coalition discovered that businesses that were located in economically distressed counties of Appalachia were 2.5 times more likely to be denied credit when compared to peers most anywhere else in the nation. So Appalachia’s small business owners were much more likely to utilize their personal savings or personal credit cards to fund companies when compared to those elsewhere in the U.S.
The purpose of the Appalachian Association Fund is to reverse such trends, through the channeling of investment money into the area. With capital raised by private investors, the AAF is going to be able to make loans to small businesses serving Appalachia, as well as finance construction of clinics, schools, and other community locations. The structure is going to allow investors access to much more capital to work in Appalachia through the seed funds, significantly reducing the transaction costs accrued.
AAF will start small – with an initial closing of only about $15 million, but it should have a big impact. The first round of funding is going to meet demands of over 150 businesses, creating many jobs in rural Appalachia. The next rounds of capital raising are on their way too, and when the AAF is fully funded, it expects to channel over 230 million dollars in private capital to the Appalachian communities.
The small and medium size businesses end up being the backbone of the United States’ economy – so make sure you invest in order to help them thrive.