How Impact Investments Can Strengthen Rural Economies in the Age of Covid-19

Covid-19 has exacerbated preexisting disparities in rural economies in terms of jobs, poverty levels, access to markets and finance, infrastructure and connectivity, education quality, and healthcare provisions. Rural economies have the potential to create meaningful economic opportunities in the future, yet rural development needs to go beyond the notion of improving agricultural productivity; it must promote agricultural transformation that modernizes and commercializes agriculture, encourage investments in human capital in rural areas, and bolster private enterprise and investment.

Innovative financing tools such as impact investments (e.g., investments in private debt, publicly traded debt, and private equity) will be critical to strengthening rural economies post-Covid and generating social and environmental impacts as well as financial returns. Impact investments can include strengthening infrastructure (e.g., digital), improving financial access, and building up human capital in the regions that need it most through targeted project funding. In the age of Covid-19, investors can assist in response and recovery efforts such as increasing flexibility for borrowers by restructuring loans, helping MSMEs remain open and financed, and addressing the most pressing community needs such as food security and health.

Economic recovery efforts post-Covid-19 should call for greater attention and investment in rural areas to prevent future shocks. Impact investments can fill the financing gap while addressing pervasive problems like connectivity and access to finance, creating a more sustainable economic model for rural economies going forward.

This report is made possible by generous support from Heifer International.