Fact Sheet Farm Credit Administration 

 1501 Farm Credit Drive 

 McLean, Virginia 22102-5090 

 

May 8, 2008 Contact: Martha Schober or Christine Quinn, 

 703-883-4056 

 E-mail: info-line@fca.gov

 Web site: www.fca.gov 

Fact Sheet on Rural Community Investments Proposed Rule 

The Farm Credit Administration (FCA) Board approved a proposed rule that would authorize 

each Farm Credit System (FCS or System) institution to purchase and hold debt and equity 

investments in rural communities outside of urbanized areas under prescribed conditions. 

The proposed rule is patterned after pilot programs that FCA has authorized over the past three 

years. Investments made under these pilot programs have provided greater access to capital for 

economic development initiatives, while adding liquidity to rural financial markets. 

Conditions in Rural Communities 

Many rural communities are struggling to retain economic viability and vitality, which can provide 

economic opportunities and a better quality of life for their residents, including farm families. 

Rural communities face numerous demographic, social, and economic challenges in meeting 

the needs of their residents. As a result, many of these communities find it difficult to provide the 

essential facilities, infrastructure, services, and jobs that their residents need. Rural 

communities depend on a combination of government and private-sector financial sources to 

provide the necessary capital to fund rural development projects. However, in many cases, no 

single financial entity is able to provide rural communities with whole-project funding, which is 

necessary for essential projects. 

Purpose of the Proposed Rule 

The proposed rule is designed to give System institutions flexibility to “provide for an adequate 

and flexible flow of money into rural areas,” as noted in the preamble to the Farm Credit Act of 

1971, as amended (Act). In addition, the Act authorizes the FCS to hold investments that FCA 

approves by regulation. 

The proposed rule would authorize System institutions, in partnership with governments and 

non-System financial institutions, to purchase securities issued for projects that support 

community facilities, infrastructure, and core services and for projects that create jobs for rural 

residents. 
2

Proposed Rule 

The proposed rule would authorize FCS banks, associations, and service corporations to 

purchase investments in debt securities for specific purposes and equity investments in venture 

capital funds and rural business investment companies. Investments in rural communities under 

the proposed rule would be limited to the following: 

 

• Rural communities outside of “urbanized areas” as determined by the latest decennial 

census of the U.S. Census Bureau. The U.S. Census Bureau defines rural communities 

as having fewer than 50,000 residents. 

• Debt securities for qualified investment purposes and projects that provide capital for 

o essential community facilities such as hospitals, health care facilities, emergency 

facilities and equipment, and schools; 

o basic transportation infrastructure projects that provide funding for roads, 

bridges, and other public transportation systems; 

o revitalization of rural communities after a disaster and assistance to rebuild areas 

recovering from disasters where an emergency has been declared pursuant to 

law; 

o rural development projects that are guaranteed by the federal government or 

sponsored by state or local governments; and 

o non-System financial institutions for rural development lending. 

• Equity investments in venture capital funds and rural business investment companies 

that provide capital investments in entrepreneurial operations that promote economic 

development and create job opportunities in rural areas. 

• Other investments approved by FCA upon a written request by a System institution that 

describes the investment, explains its risk characteristics, and demonstrates how the 

investment is consistent with the System’s statutory mandate to serve agriculture and 

rural communities. 

Investment Management Controls 

Sound investment management practices prescribed by § 615.5133 would apply to rural 

community investments under the proposed rule. Additionally, the principal restrictions that the 

proposed rule imposes on rural community investments are as follows: 

• All rural community investments at any System institution could not exceed 150 percent 

of its total surplus. 

• No System institution may invest more than 15 percent of its total surplus in debt 

securities issued by a single obligor, except government-guaranteed securities. 

• All rural community investments would have maturities of 20 years or fewer except for 

investments guaranteed by the United States or its agencies, which could have 

maturities of up to 40 years. 

These controls ensure that investments in rural communities do not adversely affect the safety 

and soundness of System institutions. They also enforce the Act and prevent the FCS from 

moving away from its primary mission of lending to agriculture.