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All Systems Go for Four Directions Development Corp.

Four Directions Development Corporation has a lot to celebrate. What started 10 years ago as a one-person operation in a corner of a home with a loan budget of around $250,000 is now a thriving Community Development Corporation and Community Development Financial Institution (CDC/CDFI) with tax-exempt status, headquarters in Orono, Maine and a branch office in Bangor, eight full-time employees, six consultants and an annual operating and loan budget of more than $2 million.

Four Directions has made more than $7 million in loans to members of Maine’s four Wabanaki nations—the Passamaquoddy Tribe (representing two reservations), the Penobscot Indian Nation, the Houlton Band of Maliseets and the Aroostook Band of Micmacs. Most tribal members and territories are concentrated in Aroostook, Penobscot and Washington counties, some of the state’s poorest and most remote places. Considering how limited the opportunities are for home ownership, home improvement, and self-employment in these areas, and the further constraints of tribal land restrictions, limited credit histories and low financial literacy, Four Directions’ growth is an amazing success story. “Reaching our 10th anniversary is a major milestone,” said founder and Executive Director Susan Hammond. “We’re going to have a major 10th anniversary party in the fall.”

Hammond, who has a degree in business administration, is a member of the Penobscot Indian Nation and worked as the tribe’s housing director for years. Prior to the creation of Four Directions she was on the tribal council for about five years, during which time the need for some kind of funding program was becoming more and more obvious. “The tribe has programs but it can’t meet everybody’s needs. Often a program’s loans are to help people on low income, but that doesn’t address the needs of moderate-income individuals or others who just don’t have access to funds.”

One of the major problems at the time was that tribal members couldn’t get home mortgages from banks and other traditional lenders, because they could not secure collateral on the loans. Among the challenges of lending to people who live on reservations is that only tribal members can own land or property there, which means the land tribal members owned couldn’t be used as collateral because the bank couldn’t assume title to that property in a default. (That restriction has eased somewhat with special federal funding programs that guarantee loans to American Indians for conventional lending sources.) There was a big push back then in Indian country for the CDFI model, and Hammond says a presenter at a workshop convinced her it would be perfect for even a small tribe of 2,400 members like the Penobscot Nation.

The Penobscot nation supported the idea of creating Four Directions as an independent, non–tribe owned, nonprofit lending organization and provided some financial support. All four tribes contribute varying amounts each year depending on what they have available. That can range between $3,000 and $10,000, said business program coordinator Barbara McGowen.

In March 2001, Four Directions became the first Indian-run CDC/CDFI east of the Mississippi, with Hammond as its executive director. She set up the company in a corner of her house with a copier, a phone and a staff of one: herself. Her mission was to improve the social and economic conditions of the tribal members of the four Maine tribes by investing in affordable housing, tribal business ventures and small- and medium-size businesses, and her first task was to raise money for the mission. And almost immediately, she received invaluable help. “It was serendipitous,” she said. “Donna Loring [the Penobscot nation’s former representative in the Maine legislature] introduced me to Ron Phillips, the president of Coastal Enterprises, a very large and successful CDI in southern Maine. He introduced us to a lot of funders, and based on his recommendations, they provided us seed money.”

With about $250,000 for loans, Hammond was able to make around six loans that first year—a prerequisite for gaining CDFI certification. “You have to make loans before you can become an official loan maker,” she explained. With those six loans on the books, Hammond realized she needed to bring in people in order to grow, so she hired a loan officer and set up an office in Orono. “We’ve been slowly growing since then. We’ve made over $7 million in loans—about $6 million in housing and about $1.5 million in business funding,” Hammond said. “And of all our housing loans, we’ve had no losses—none. In our business loans, we did have a couple of losses, but we’ve since tightened up our policies and now we’re doing a better job at underwriting.

On the business side, Four Directions has made about 35 loans to a diverse range of businesses. Among them are restaurant owners, small construction companies with one or two tribal member employees, an apartment building owner, a musician and a basket maker. “And we’ve done an insect-repellent loan,” Hammond said, laughing.

When asked if Four Directions has had any spectacular failures—or even near failures—Loring laughed. “Failures? The big story here is that Four Directions is such a success in this failing economy,” she said. “The exciting thing is that we haven’t suffered any big failures. In fact, I think the Four Directions model—the way we’ve taken care of clients and educated them in financial literacy and trained them in business practices should be the model for success across the country.”

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One of the biggest success stories is unfolding right now, McGowen said. Four Directions provided free technical assistance to a Passamaquoddy man developing a workable business plan for revitalizing the Indian fisheries industry with a processing plant to sell and distribute fish. (The man’s name is not being used because of nondisclosure agreements signed by Four Directions.) After a year, Four Directions gave him a small loan for working capital and to buy equipment.

“That small loan got him out to sea—it put the boat in the water and allowed him to employ five people fishing,” McGowen said. Now, about two years later, he’s about to close within the month on a larger loan that Four Directions has leveraged for him with two other CDFIs. Once the deal is sealed, he’ll refit and enlarge the processing facility he leases on tribal land, hire up to a dozen new employees, and take out a lease-purchase agreement on another boat. Along the way he has developed and implemented a significant training program to bring Native fishermen back to sea.

“When he started this project I don’t think there was a single Passamaquoddy commercial fishing business left. Sipayik means ‘people of the pollock.’ Fishing is part of their traditional way of life that was lost and now it’s coming back. And there’s a lot of excitement around it,” McGowen said.

But Four Directions is much more than a lending tree. In addition to its business and educational services, the organization has launched a major economic development initiative—the Cultural Tourism Program—that will bring jobs and visitors to Indian country in Maine. “We feel that culture is a natural resource tribes have that can be developed to help them create a healthy vibrant economy in their communities. We want to help them create that tourism economy and we’re going to do it by supporting businesses that support tourism,” Hammond said.

With a two-year grant-planning-and-development grant from the U.S. Department of Housing and Urban Development, Four Directions is in the process of launching the Wabanaki Cultural Tourism Center—it will be a world-class training center to help the tribes in creating tourism and hospitality infrastructures within their communities. A community entrepreneur who may want to pursue a tourism-related enterprise—a hotel, a campground, a gas station, a white-water rafting business or a restaurant—will get training in business development, hospitality, culinary arts and other disciplines from the center.

The program includes a virtual Wabanaki trail, a virtual Wabanaki marketplace, and a branding initiative that will showcase—and market—the products made by dozens of small business and micro-enterprises, artisans and artists. The goal is to get Maine Indian-made products directly to the consumer, thereby maximizing the income for these cottage industries. When it has established markets and distributors for these products, Four Directions anticipates growth opportunities for emerging entrepreneurs in home décor, clothing, cultural performance, food products, beauty products, jewelry, art and eco-tourism, to name a few.

Hammond said her biggest challenge now is managing the growth of the organization and raising the $2 million a year to run it and make loans—a cyclical effort familiar to all nonprofit organizations. Generally, donations and grants raised for its operating budget are nonrepayable while monies raised for loan-making are repaid by the borrowers into the revolving fund. The U.S. Department of the Treasury’s CDFI fund is the biggest source of funding, but all federal grants are competitive, so there’s no guaranteed amount of money coming in each year and fundraising is a constant. And as Four Directions increases its number of loans each year, more capital needs to be raised for the revolving loan fund.

CDFIs serving Native communities are booming all over the country. The U.S. Department of the Treasury’s CDFI fund recently announced a record number of applications for fiscal year 2011—a nearly 50 percent increase over last year’s funding requests to $35 million for American Indian, Alaska Native and Native Hawaiian communities. The Native CDFI industry itself has grown from just 14 certified Native CDFIs in 2001 when Four Directions was certified to 59 as of December 2010, with an additional 60 preparing for certification.

“I am delighted to see the strong growth in applications for the program as Native CDFIs continue their critical work overcoming barriers to capital and promoting economic development in Native communities,” said CDFI Fund Director Donna Gambrell. “Native communities face critical economic challenges and Native CDFIs are providing the leadership and stability to expand opportunity and create lasting change in the communities they serve.”

Looking to the future, Hammond said, “What I’d like to see are tribal communities that have healthy and vibrant economies and all of our tribal members living in safe and decent affordable housing and employed in rewarding jobs.”