There's been a lot of talk since the election about the challenges facing rural America. A lack of economic opportunity in these areas has translated into chronic high unemployment, poverty, drug problems, and rising mortality rates. But jumpstarting growth in rural places isn't easy, and as we've reported, there's not a lot of philanthropic activity in this space.
One promising trend in rural areas involves food systems and agriculture, an area that is attracting considerable funder interest right now. We've reported before on funders who have an eye on supporting farmers. What's happening in Maine, the poorest state in the Northeast, is a good example of new activity here.
It doesn’t take much time spent in Maine to realize that they’re serious about their food and drink, from the dynamite seafood to the craft beer scene. But beyond a rustic foodie scene, there’s a promising industry of small farmers and food producers in the tiny rural state.
According to census figures, the number of farms in Maine is up 13 percent since 2006, and agriculture sales are up 24 percent since 2007. The number of farmers under 34 is also on the rise, and “career changers” have contributed to the growth of local agriculture business.
And yet, getting a loan for land, equipment or expansion is really hard. The resulting deficit, an estimated $90 million in unmet need for small farm mortgages, set Scott Budde and Sam May on a mission to create a new lending institution, the Maine Harvest Credit Project.
It’s a finance project, not a grantmaking institution, but the team is looking to philanthropy to anchor the project with $2.4 million toward startup costs and seed capital to back up future loans. May and Budde are about 60 percent there, having raised $1.44 million, including from the Merck Foundation, Sewall Foundation and Ram Island Conservation.
Once the team has pulled off the fundraising and completed the lengthy process of becoming a state credit union, they will have created something not quite like anything out there: a three-person financial institution, founded with donated capital, making up to six-figure grants mostly to farmers, fishers and brewers, and only in Maine. And, they hope, a stronger local agricultural economy for the state.
You might ask—if there’s such a thriving agriculture sector in Maine, why the need for such an unconventional lender, and why the need for donations? The main answer from its founders is that agriculture's external factors—think drought or blight—spook a lot of profit-seeking financial institutions. But as May and Budde have explained it, a lot of lenders just don’t understand the industry.
May grew up on a dairy farm and sits on the board of the Maine Organic Farmers and Gardeners Association. Budde, who met his new business partner only recently, comes from a banking background, having created a social and impact investment department for TIAA-CREF. Although from different backgrounds, they each bring their own appreciation for the challenge and need for funding facing small farms.
As for the need to raise $2.4 million, regulators want a lending institution to have 7 percent of expected equity raised in capital, and because of the large size of their anticipated grants, they’re lining up 15 percent.
The Maine Harvest Credit Program is a really fascinating project that’s seizing on a couple of trends in agriculture, nonprofits, and philanthropy. For one, as we’ve written about at length, there’s tremendous philanthropic interest in making our food system more regional and sustainable. But we’re also seeing all kinds of funding projects seeking to spark private finance, from energy efficiency to global development. If May and Budde pull it off, it could provide a one-of-a-kind local model of both that could potentially sprout up in other rural economies.