The eight forms of community wealth, Part 2: Financial capital
There are eight forms of community wealth that, when working together, enhance economic development in rural communities. This article focuses on one of those forms: financial capital.
In a previous article we discussed WealthWorks, a program provided through Yellow Wood Associates. The WealthWorks approach incorporates eight forms of community wealth to holistically address economic development in rural communities. The second form of community wealth is financial capital.
Financial capital is a community’s unencumbered monetary assets invested in other forms of capital or financial instruments.
Financial capital, if well-managed, generates monetary returns that can be used for further investment or consumption. For example, financial capital can be invested in land protection through outright purchase or purchase of easements. Public financial capital can be accumulated in a variety of ways including building budget surpluses by collecting more in tax revenues than is spent on services, borrowing through bonding, and charging fees for public services over and above the real cost of services. “Rainy day funds” are an example of public stewardship of financial capital, designed to help society weather risks and uncertainties.
In addition, through the growth of the non-profit sector, private philanthropic capital is often tapped for investment in other forms of capital that yield public goods, for example, preventive health care programs to increase individual capital. Stewardship of financial capital implies responsible investment to generate added income as well as elimination of unnecessary cost or waste in providing public goods and services. In creating wealth, we strive to invest financial capital in ways to increase and improve the quality of the other forms.
A West Michigan team has recently completed their WealthWorks training and has begun project development and implementation, focusing on trails and pathways. A Michigan State University Extension educator is part of this team, serving in the role of coordinator.
Learn about the other forms of community wealth:
- Built capital
- Individual capital
- Intellectual capital
- Natural capital
- Political capital
- Social capital
- Cultural capital