What Four Small Towns Taught Us about Rural Investment

Understanding rural investment dynamics matters to the Federal Reserve: Supporting a strong and resilient economy for all Americans is core to our mission. Through our rural prosperity initiative at the St. Louis Fed, we focus on what helps rural areas grow, along with what gets in their way, which allows us to better support the conditions for local economies to adapt and thrive.

That’s why we wanted to hear directly from rural communities. This year, we traveled to four small towns across the St. Louis Fed’s DistrictHeadquartered in St. Louis, the Eighth Federal Reserve District covers all of Arkansas, most of Missouri, and parts of Illinois, Indiana, Kentucky, Mississippi and Tennessee. for listening sessions and sat down with people who know about rural investment firsthand.

The listening sessions, plus an analysis of investment data, reveal the reality of rural capital gaps. At the same time, the sessions uncovered a powerful narrative: Communities are building resilience through trust-based collaboration, creative problem-solving and local vision.

The content of these discussions demonstrates how interpersonal relationships, despite persistent needs for more housing and human capacity, can transform limited resources into community assets, while emphasizing that effective rural investment requires tailored, place-based solutions rather than one-size-fits-all approaches. Understanding what helps rural areas grow — and what gets in their way — allows the Federal Reserve to better understand local economies.

Some key takeaways from the listening sessions:

• The gap is real: Rural communities receive just 22 cents per capita for every dollar grantmakers invest in urban areas, with federal funding declining sharply in recent years.
• Trust is infrastructure: Strong relationships and community vision help rural areas turn limited resources into real projects.
• Capacity and housing are universal barriers: All four communities struggled with limited staffing for grant administration and insufficient attainable housing for working families.
• Every rural community is different: Effective solutions must be tailored. A volunteer handling the opportunities around a major lithium supply development in Arkansas has vastly different challenges than an entrepreneur launching a small business in Mississippi.

“Capital Is Relational”

These three words from one rural development leader explain both the challenge and the opportunity facing rural communities today.

Nationally, rural communities are underserved when it comes to investment and access to capital. According to the U.S. Department of Agriculture’s March 2026 report (PDF) on philanthropic investment in rural America, approximately one-third of rural counties had no locally based grantmaking organizations between 2014 and 2021. While the absence of rural grantmakers does not necessarily mean the absence of philanthropic investment, on average, for every $1 invested per capita in an urban community across the Midwest and South — the regions that include the St. Louis Fed's District — rural communities received just 22 cents.Figure is from authors’ calculations using Appendix A of the USDA report.

As Federal Reserve Board Gov. Michael S. Barr highlighted in his April 2026 speech, “Strengthening America’s Economy through Rural Investment”: “A community’s ability to attract and deploy capital is essential to its vitality and resilience.”

We visited Fulton, Ky.; Cleveland, Miss.; Hope, Ark.; and Buffalo, Mo., to hear how each was addressing investment challenges. In each town, we sat down with people who know rural investment firsthand: bankers, small business owners, city officials, economic development directors and community foundation leaders. Forty-two people in all joined these conversations.

Common Themes

Rural Development Moves at the Speed of Trust

Interpersonal trust was repeatedly cited as the bedrock for progress. Whether it’s using that relational/social capital to bridge access to funding in Cleveland, relationship-building with funders in Fulton, or trust in local decision-makers to deliver meaningful economic development in Buffalo, trust enables bold initiatives, fosters collaboration and motivates community engagement.

Strong Community Vision Drives Success

Participants in the listening sessions described successes as well as challenges.

Rural communities don’t always have access to specialized expertise, clear funding procedures, or enough resources to manage potential projects. Yet each community found ways to build alignment and get started. As one leader in Fulton remarked, “We didn’t start getting grants because we were doing good; we were getting grants because we were doing something.” These leaders used their shared commitment, built on trust, to drive toward results.

However, strong interpersonal dynamics haven’t allowed the communities to get past all the barriers they face, namely those involving human capital and housing.

It Takes a Village to Apply for a Grant

From local governments having limited staff and limited community or economic development organizations for support to not having formal grant administrators, all four communities shared the struggle of limited capacity and expertise to take advantage of investment opportunities. Fulton, Buffalo and Hope underscored that these gaps grow as tenured city administrators and local economic development leaders step down and depopulation continues. For example, nationally only 26% of remote rural counties had a paid economic development professional on staff in 2018 and 2019, compared with over half of metropolitan counties, according to responses to a researchers’ survey (PDF). Without the right people in place, sustainable development becomes even more challenging.

Housing Emerged as Every Community’s Most Pressing Need

As a local banker in Cleveland shared, “The challenge in Cleveland is the home price in relation to income and closing costs. Mortgage lending is tough.” This aligns with recent St. Louis Fed research showing that housing prices have dramatically outpaced income growth. Participants noted aging roads, bridges and water infrastructure compound the problem. Older infrastructure adds time and cost to redevelopment efforts, which can complicate or derail funding for new housing projects.

These themes underscore shared strengths and obstacles. But there’s a common refrain among rural leaders: If you’ve seen one rural community, you’ve seen one rural community. The unique findings from each town emphasize why solutions need to be equally specific.

Four Communities, Four Stories

From Volunteer to Economic Developer, Stewarding a More than $2 Billion Opportunity

Participants in Hope shared that just to their south, Lafayette County, Ark., sits at the center of more than $2 billion in announced and emerging economic development opportunities, including significant investment associated with the region’s lithium resources that could reshape the region’s economy.

The person helping coordinate the community’s response to this period of transformational growth? An economic developer who started doing the work as a volunteer. Her work helps connect businesses, educational institutions, workforce partners, community leaders and regional stakeholders around opportunities in critical minerals, advanced energy, workforce and education, infrastructure, housing and community development.

Through strategic planning, partnership development and collaboration with county officials, the economic developer is working to ensure that major investment translates into long-term opportunity and readiness for the county and region.

Navigating Permits Took Four Months without a Clear Roadmap

The thriving historic downtown in Cleveland, Mississippi, draws entrepreneurs, but many face a challenge: no clear roadmap for starting a business.

One local entrepreneur who successfully opened their business said they had only four or five months to modify a building and didn’t know where to go for approvals. In Cleveland, there is an opportunity for more centralized and coordinated resources for entrepreneurship. Such support systems can serve as a one-stop shop for everything from low-interest loans to providing booklets laying out what perspective business owners need to do to get building permits or arrange for fire code inspections.

“There’s no manual when you walk in that says, ‘If you want to start a business, here are the steps,’” the entrepreneur said.

The barrier wasn’t access to capital: It was clear guidance. The solution for the entrepreneur came through using relationships with local officials and other business owners to navigate the process.

Federal Help Worked in Kentucky, but It Might Not Last

In Fulton, the USDA Rural Partners Network provided technical assistance that helped local leaders navigate complicated federal funding applications. Workforce development projects that had been stuck for years finally moved forward. However, the current leaders who know how to work the system and secure grants acknowledged that their time in their positions is limited because of retirement or career shifts. This raises a critical question: How do you maintain success when both funding sources and experienced leadership can disappear?

Buffalo Turns $5,000 and Sweat Equity into Million-Dollar Wins

Once considered for closure, the Buffalo Municipal Airport revived after local leaders and volunteers invested their own money and labor to install a bathroom and replace windows. This successful demonstration of commitment unlocked state funding for fuel facilities and security fencing. As the local economic developer explained, “We can do a lot more than $5,000 with sweat equity and leadership. We’ve tried to think big but start small.” This approach has delivered results from the revitalized airport to a $3 million regional training facility, an illustration of trust and volunteer hours stretching modest investments into major assets.

What’s Next

We’ll continue to investigate these stories to identify opportunities that can bolster rural investment and prosperity. Building a strong and resilient economy for all Americans means understanding not just the numbers, but the people and relationships behind them.

Resources:

• Investing in Rural Prosperity
• Coming Up with the Money: Launching a Successful Community Development Initiative

Notes

1. Headquartered in St. Louis, the Eighth Federal Reserve District covers all of Arkansas, most of Missouri, and parts of Illinois, Indiana, Kentucky, Mississippi and Tennessee.
2. Figure is from authors’ calculations using Appendix A of the USDA report.