Southern Development Bankcorp.
George Sturgeon, President
605 Main St.
Arkadelphia, Ark. 71923
(501) 246-5811

One effective approach to beating poverty by building business involves finding new ways to help people with little or nothing put together a stake.

Two events in 1985 fell into place to create a rare opportunity for that to happen in rural Arkansas, says George Surgeon, president of the Southern Development Bank Corp., a most unusual bank in tiny Arkadelphia, nestled in the pine groves where southern Arkansas' delta region rises into the Ozark foothills.

First, Tom McRae, then president of the Little Rock-based Winthrop Rockefeller Foundation, who was worried about the incapability of the state's lending institutions to finance small and medium-size businesses, read a report about Chicago's South Shore Bank, a community-based bank with the mission of rebuilding neighborhoods through creative financing for housing construction and mortage loans.

Then, a college friend of Hillary Rodham Clinton, who wasn't yet a household name and whose husband, Bill, was still the governor of Arkansas, came back from a trip to Bangladesh raving about an unusual concept called the Grameen Bank, in which small groups of women would band together to share small loan money and peer support to start small businesses.

With lucky timing, a bright new dream reached critical mass. With the backing of the governor's office and support from WinRock and other state foundations, the Southern Development Bank Corp. was born. A full-scale bank holding company, its mission is rural economic development.

It exists solely to finance and nurture businesses that would create jobs in the poorest parts of a very poor state; and while it is expected to be self-supporting, its reason for being is not to pile up profits for its stockholders but to keep its money in motion to help individual start businesses to boost the economy and create jobs.

In 1988, the organization purchased outright the Elk Horn Bank and Trust Co., of Arkadelphia, a commercial, for-profit bank that, like its new parent, operates legally as a full-service bank under federal regulations, but applies a management philosophy very much unlike private banks: Its primary purpose is to make "development loans" -- commercial loans that contribute to the development of the local economy, loans that other financial institutions would be unlikely to grant on similar terms in the normal course of business.

As of 1991, the Elk Horn Bank had more than $2 million in development loans in process. It also aggressively reaches out to family farms, originating another $2 million in agricultural credits in an average year, offering the region's only alternative to federal farm financing.

Southern Development Bank Corp. also owns a real-estate development subsidiary, Opportunity Lands Corp., a for-profit operation that has developed two commercial centers providing office space and support services for small businesses; and it finances low- and medium-income housing developments.

Among the bank's umbrella array of non-profit organizations, the Arkansas Enterprise Group runs a variety of services to support the state's entrepreneurs. Its Southern Ventures Inc., for instance, is a venture-capital fund writing small-business loans too small and risky to interest commercial banks, hoping to encourage the development of small technology firms that pay high wages.

It currently has nearly $2 million invested in 10 companies whose products and services range from bio-assay radio-chemistry testing and ceramic coating to waste-water treatment. The group also operates AEG Manufacturing Services, a small-business incubator offering free technical assistance to small new businesses in the areas of marketing, management and financial operations.

All the feature stories on @GRASS-ROOTS.ORG's pages are reported and written by Robin Garr, a prize-winning journalist who has visited more than 500 innovative grassroots programs in all 50 states since 1990.

Browse his book, Reinvesting In America, at Amazon.com.

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