Diminishing capital investment in small communities

Experimental visualization of narrower problems
Other Names:
Unavailability of local capital
Scarcity of start-up funds
Limited availability of local business capital
Limited local investment resources
Limited private investment
Unproductive local investments
Inadequate access to development capital
Local communities are increasingly called upon to sustain their own populace through forms of cooperative enterprises. This would appear to be possible in some near-urban villages, where the fact that untrained workers are poorly paid has resulted in many of the men and some entire families leaving the community on a more-or-less permanent basis to seek employment elsewhere. When they contribute from abroad to family support, the average family income in a village is raised and individual families have a certain amount of capital. However, because these families do not see investing in the village as economically beneficial, the few people who engage in serious enterprises operate in the city. Even if there is interest in expanding businesses, buying farm land or creating industries, the cost of the initial investment is so great and land acquisition is so difficult that few follow through and proposed investment plans are rarely materialized.

When communities are unable to find appropriate channels of financial support, self-sufficient economies are not realized and subsistence-oriented living continues to undercut development. Unavailability of local and outside funding in rural communities results in a shortage of capital for farming or business improvement. Limited family income hampers attempts at raising money for community projects - minimal family income is not put into savings since banking services are remote and benefits unclear, and the concept of forming a local cooperative union for the purpose of saving is unfamiliar. Also, a past history of financial mismanagement may breed an air of mistrust in local attempts to pool resources. Limited local assets prevent the securing of loans needed for expanded farming, starting businesses and constructing schools and other buildings.

Capital is urgently needed in many rural communities to increase production at the local level. This is not a matter of the people needing more money. It has to do with setting a new economic dynamic in order to raise living standards. Access to the development capital needed for village maintenance, public works and the development of local services and businesses can best be described as "incomplete", for only partial ways of releasing available funding for villages have been found. Unsettled suits with agencies responsible for the construction of many village homes delays necessary home repairs. Both limited private funding and the high cost of materials discourage residents from undertaking home maintenance. The absence of a salary base and the small commercial property bases limit revenue for taxes. Poor market prices; shrewd, if not dishonest practices of middle men; exorbitant interest rates; the loss of land to outside buyers; lack of knowledge of commercial affairs - all these take their toll, so that the small amount of capital that is ever accumulated simply drains away. The understandable reluctance of legitimate outside institutions to invest in village effort adds to the self-defeating cycle. Local people do not understand why the situation is paralyzed but they are profoundly aware of the paralysis. Research has not yet been done to find appropriate funding sources for new industries, services and wages for potential employees. More importantly, modern business development has barely begun in most villages. As a consequence, villagers find it difficult to imagine their village generating its needed capital from within.

Related Problems:
Inappropriate investment
Problem Type:
F: Fuzzy exceptional problems
Date of last update
01.05.2000 – 00:00 CEST