An Economic Development Fund (EDF) can be established by governments or non-profit foundations to promote economic growth in targeted areas. It can provide loans, grants, and investments to individuals and businesses, and may target specific segments of the local economy. Funding depends on customized application requirements and may be provided as a grant, loan, or infrastructure creation.
An Economic Development Fund (EDF) is a program charged with helping economic growth in targeted areas. An EDF can be established through local, regional or national government initiatives or it can be created as a non-profit foundation. The main functions of an economic development fund can include providing loans and grants to qualified applicants, making strategic investments to promote economic growth and securing the future of the EDF through finance management.
The establishment of an economic development fund is often in response to circumstances that may depress growth in a targeted area. For example, an industrial city that loses its main provider of jobs can lobby local government for the creation of an EDF to help develop new sources of employment and community growth. In developing countries, where access to financial infrastructure such as banks may be limited, an EDF can provide individuals and businesses with the mechanisms to receive loans or grants to start schools, businesses and community programs.
Some EDFs work to target specific segments of the local economy for growth. An example of targeting could be encouraging local agricultural development through commercial and real estate loans for smallholder farmers. A targeted approach can create a positive influence on the economy as a whole; by funding local agricultural activities, an EDF can encourage the use of available land, increase job opportunities and reduce the cost of food for local residents.
The process of receiving funding from an economic development fund depends on the availability of funding and customized application requirements. Applicants may be required to submit detailed information about their existing or proposed project and are usually required to provide frequent updates and data that helps ensure funding is applied correctly. Depending on the fund’s rules, applicants from particularly depressed regions may prefer those from wealthier areas, even though both locations are under the fund’s umbrella. Funding can be provided as a grant, a loan or even as the creation of the necessary infrastructure that will enable a project to continue.
An economic development fund can also pursue its growth mission through investments. By providing capital in exchange for a percentage of the enterprise, an EDF can stimulate growth by financing its continued existence. Investing in new businesses can carry some measure of risk, as businesses can easily fail despite generous seed funds. Perhaps because of this risk, not all EDFs use an investment-based structure, relying instead on private donor funding, endowments or government revenues as a means of financial survival.
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