What about a state infrastructure bank like North Dakota?

A smart reader asked me about a state infrastructure bank in Minnesota, like they have in North Dakota to pay for things like broadband. (Well help finance things like broadband.) I won’t pretend to be an expert or have an answer but I thought it might be worth sharing what I learned when he asked.

From Wikipedia I learned….

The Bank of North Dakota (BND) is a state-owned-run financial institution, based in Bismarck, North Dakota. It is the only state-owned facility of its type in the United States other than the Puerto Rico Government Development Bank.[2]

Under state law, the bank is the State of North Dakota doing business as the Bank of North Dakota.[3] The state and its agencies are required to place their funds in the bank, but local governments are not required to do so.

Other entities may also open accounts at the Bank; however, BND offers fewer retail services than other institutions, and it has only one office. These limit its competitiveness in consumer banking.

[4] The bank does have an account with the Federal Reserve Bank, but deposits are not insured by the Federal Deposit Insurance Corporation, instead being guaranteed by the general fund of the state of North Dakota itself and the taxpayers of the state.[4] BND also guarantees student loans (through its Student Loans of North Dakota division), business development loans, and state and municipal bonds.[4]

From the North Dakota Bank site I learned…

Several sections of the North Dakota Century Code address the creation of the Bank, its oversight and role in the state. Today, the North Dakota Legislature will appropriate funds from BND when needed through the budget process or state law.

Chapter 6-09 The Bank of North Dakota

BND has responded to the state’s needs since its inception.

From the Institute of Local Self Reliance I learned…

The core mission of the Bank of North Dakota is to cultivate the state’s economy by supporting local banks and credit unions.  The more these community-based financial institutions flourish, the thinking goes, the more capacity they have for financing new and growing businesses.  BND works with almost all of the state’s 89 local banks and many of its credit unions.

One of the chief ways BND fulfills this mission is through its lending.  The bank’s $3.9 billion loan portfolio has four main components: business, farm, residential, and student loans.

Its business and farm loans, which comprise half of its lending, are almost exclusively “participation” loans.  These loans are originated by local banks and credit unions, but BND provides part of the funds. In doing so, BND expands the lending capacity of the state’s local financial system.  At the end of 2014, BND had almost $2 billion in participation loans in its portfolio, an amount equal to 10 percent of the total value of loans outstanding on the books of the state’s small and mid-sized community banks and credit unions.  This partnership helps local banks compete is by enabling them to make larger loans than they could on their own.  As their business customers grow and require larger loans, North Dakota’s local banks, with the support of BND, can continue to meet their needs, rather than lose these borrowers to large out-of-state banks.

Banking is not my specialty. I’d be interested in hearing opinions. I like the idea of a bank that’s mission is to support economic development and I think in rural areas part of the recipe for economic development is broadband. We’ve seen that’s true per household (to the tune of $1850/household/year); I have to think business potential is at least as good. Would a state bank supporting/backing the local portion of financing make the broadband grant program even stronger?

This entry was posted in Funding, MN by Ann Treacy. Bookmark the permalink.

About Ann Treacy

Librarian who follows rural broadband in MN and good uses of new technology (blandinonbroadband.org), hosts a radio show on MN music (mostlyminnesota.com), supports people experiencing homelessness in Minnesota (elimstrongtowershelters.org) and helps with social justice issues through Women’s March MN.

2 thoughts on “What about a state infrastructure bank like North Dakota?

  1. Having grown up not far from ND, I can say that the same ideas were prevalent in parts of MN, too. My great grandfather, who homesteaded there, was active in creation of not-for-profit bank, insurance company, fire department, grain mill and elevator, telephone company, power company, grocery store, gas station, and probably other things. That’s the way it worked in “the old country”, so that’s the way they did it in MN. It worked well, until some of the members figured out that they could get rich by selling out to for-profits. My great grandfather never forgave them. ND had the advantage of being on the frontier longer, so those local coops combined, rather than being bought out.

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