Learning Community Development Finance Doing Development in Arkansas, by Richard P. Taub Reviewed by Stewart E. Perry Doing Development in Arkansas Ohio and Michigan). From 1988 when in business lending was less successful. is a rich and fascinating case Southern was incorporated until 1997, ShoreBank built a relationship with study of community develop- Taub lived and worked for much of the neighbourhood needs through an array time in southwestern Arkansas, and the of divisions and subsidiaries, including a ment finance. It reminds us authenticity of his fieldwork as well as nonprofit that worked with neighbour- forcefully of all the pieces we his personal candor makes his book ring hood groups on the needs of the lower must juggle in this field and so true for this CED practitioner. The income residents. often do not manage well at all. people at ShoreBank and at Southern Partly because they were locals, the gave him unprecedented access to their founders had useful connections in the The book has the added signifi- work, and they deserve a lot of credit for city and elsewhere with which to lever cance that the case is part of the allowing him to paint the picture of their additional resources. Within the first story of the creation of a federal work with all its warts. For to tell the dozen years, Taub reports in the first community development truth, the initial process at Southern was book, they were responsible for bringing not promising. in more than $150 million for housing, finance program in the U.S. and demands careful reading as we seek to shape a federal commu- nity development finance In this time when “success stories” are the basis for so much program in Canada. journalism, some people will find Taub’s book disheartening. The case, Southern Development Don’t make that mistake! We need to attend to community Bancorporation in Arkansas, arose out of a 1986 invitation from the then- development finance in all its complexity, known & unknown. governor of Arkansas to ShoreBank We can’t do that without also confronting serious errors, Corporation, an effective community honestly, clearly, & sympathetically. development bank in Chicago, to help the most marginalized section of his state. Governor Bill Clinton of course went on to become President, and he eventually got Congress to establish the Perhaps ironically, a brief recapitula- infrastructure, and employment projects. Community Development Finance tion of ShoreBank’s history reveals some Key members of the bank’s staff were Institution branch of the federal of the reasons why Southern’s perfor- South Shore residents and involved Treasury Department. It continues to mance was so disappointing in the period otherwise in that community’s activities. provide funds and technical support to Taub reports. A small group of socially Now, contrast that with the Arkansas CED-related lending and venture responsible investors in Chicago (initially situation. The Chicago founders had no capital activities, most importantly to with perhaps US$8 million in capital) ties to the area. They were invited by a such community-based and successful bought South Shore National Bank to governor who, while bornin the target groups as Coastal Enterprises, Inc. in demonstrate how a bank could operate area, was notof it. Most of the board Maine. on principles responsive to the revitaliza- members recruited for Southern were Taub got involved in studying tion needs of a small, mostly black also high-profile Arkansas personalities Southern because he had already done a neighbourhood, abandoned by Chicago’s from outside the target area. This target case study of the early history of financial institutions. was at first to be the Delta (southeast ShoreBank (Community Capitalism , 1988). For years, ShoreBank struggled to Arkansas) but was redefined as south- ShoreBank officers asked Taub to follow learn how to make profitable the home western Arkansas – some 21,000 square their work in Arkansas (they were to be and other mortgages that helped miles with 650,000 in population. Unlike concurrently at work expanding into transform the neighbourhood. Its record the small, declining neighbourhoods of makingwaves volume 17, number 3 11 Résumé : Apprendre comment faire The Chicago team and the board they capital arm had only enough funds to do r du financement de développement recruited in Arkansas sought a bank to about a dozen deals; and a lending n communautaire purchase and repurpose, after the company, pushed to become self- i ShoreBank model. After looking for over sufficient, undertook excessively risky p Le livre de Richard Taub Doing Development a year, they finally settled on one in a deals to generate operating income. m in Arkansas (Faire du développement en town far from the Delta region and in Readers of this review, enmeshed in c Arkansas) décrit la première décennie tumultueuse de travail de la Southern competition with two other local banks. marginal communities whose problems f Bancorp (Southern) pour revitaliser une ShoreBank made the purchase with outsiders (usually government officials) M région rurale en suivant l’exemple et les capital from national foundations and have long tried to solve with disjointed c instructions de la Shorebank à Chicago. two major Arkansas foundations, but by and limited programs, will readily w La tâche de Southern était de rendre federal law could not actually own and recognize some of Southern’s initial s accessible du crédit à des entrepreneur.es operate it. It instead became a subsidiary handicaps. It is no wonder that in its first T afro-américains de l’Arkansas. Une plus of the newly-established Southern six years or so the corporation accom- w grande accessibilité encouragerait l’entreprenariat, créerait des économies Development Bancorporation (now plished very little of what its founders set l locales et relancerait l’économie régionale. “Southern”). out to do. s Mais l’évaluation du programme était The Chicago team flew in every so Just as the ordinary CED group S mesurée en volume de prêts et non en often to be guides, mentors, consultants, experiences it, the main funders made impact économique. Les attentes étaient and somehow bosses, if only tenuously, of unrealistic demands on the bank and its a beaucoup trop grandes et le temps alloué the development bank staff they had programs for self-sufficiency. Outside and w beaucoup trop court, surtout pour un si newly recruited. With the exception of inside assessment of progress was tied to f grand marché cible. Southern a cherché peu de partenaires institutionnels, corporatifs et the president of the purchased bank volume of activity rather than to evidence n d’agences sociales avec qui partager le (who left within a year), the most of impact – a pitfall to which CED c fardeau et l’expertise. De plus, Southern a important recruits originated almost workers and their supporters are often a fait du crédit pour les entrepreneur.es sous- exclusively in cosmopolitan east or west prone – and all too understandable, given c desservis le pilier de sa stratégie de coast settings. They were enthusiastic, the scale of the CED task. Expectations u développement. Ce qui a grandement sous highly-trained, and impressive people, were set much higher than the initial d évalué la complexité des problèmes sociaux but they were not thoroughly experi- resources could have achieved, especially o et économiques qui accablent les communautés qui se détériorent. enced in the specific kinds of develop- in terms of the size of the target area. Ce n’est peut-être pas « l’histoire à ment tasks with which they were Moreover, as we have learned over the c succès » que plusieurs d’entre nous aimons charged. Of course, they were also years, impact can come only by enlisting f entendre, mais la capacité des praticien.nes personally unfamiliar with the intricate many local and distant institutional, b canadiens d’apprendre de cet exemple est mores of the American South and its corporate, and social agency partners in s de la plus grande importance pour nos rural and racial contours. the effort. Southern rarely spent any S efforts de créer un programme fédéral de Southern’s board included such energy on that partnering process, and a financement de développement communautaire. Arkansas luminaries as Hillary Clinton, instead tried to do the work of develop- t Wal-Mart’s Rob Walton, and Tom ment by itself. Little use was apparently a McRae (president of the Winthrop made of lessons already learned by others, b Chicago, set within a major metropolitan Rockefeller Foundation). But they did the insights reported in 1993 by Julia Ann t area of myriad resources, southwestern not manage to raise additional capital or Parzen and Michael Hall Kieschnick in Arkansas has long been marginal, generate business for the bank, and they Credit Where It’s Due, for example.* depressed, and enjoyed only a limited and the managers never developed a close But probably the most significant relationship with a far-off urban center working relationship, as had been true at handicap was the theory on which (Little Rock, the state capital). ShoreBank. The scale of capitalization Southern was founded: that development Rather than concentrating on housing (under $13 million) was far below what would come primarily by providing credit and related development as ShoreBank had, could have a major impact on such a large to previously under-serviced entrepre- Southern’s task was to bring credit to local and needy area. Beyond that, the network neurs. That is simply not the theory of (black) entrepreneurs whose businesses of related and subsidiary financial community or regional economic would be the start of a regional transforma- elements, separate corporations designed development, for it set one chief financial tion. Little credit was thought to be and set up for different specialized tasks tool as the answer for what has to be accessible to such entrepreneurs.