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Changing the Face of Poverty

June 25 marked the anniversary of the Battle of Little Bighorn, known by some as Custer’s Last Stand and known by the Sioux Indians as Victory Day. History notes the Battle of Little Bighorn as the most famous battle of the Great Sioux War of 1876, and while it was an amazing victory for the Sioux, the bittersweet aftermath that followed led to an aggressive campaign mounted by the U.S. Army to force the remaining free Indians onto reservations.

Within a couple years, the U.S. government redrew boundary lines to remove the resource-rich Black Hills from the original reservation boundaries (only one of many moves by the government that resulted in land loss for the Sioux), and the Great Sioux Nation was left defeated and broken.

Indians have long struggled with a loss of wealth and reservations are often portrayed as poverty-stricken. Many Americans are struggling too, and the median net worth of families in the United States plunged by almost 40 percent over the last three years, according to a report released this week by the Federal Reserve.

But Native Americans have been fighting since the first settlers came to America, and they aren’t about to give up now.

Over the last couple decades, a movement has taken root from within reservation communities that has been empowering tribal citizens to renew their traditional values and embark on a path to prosperity.

Many reservation communities have created community-based revolving loan funds, also known as community development financial institutions (CDFIs), to spur economic activity. These unique financial institutions provide loans, training, and assistance to underserved low-income populations that traditional lenders would consider “high risk.”

Mainstream banks might have a thing or two to learn from the community loan fund business model. Still experiencing aftershocks of the 2008 financial crisis, the Federal Reserve reported that banks had an average 2.3 percent charge-off rate or default rates for commercial and industrial loans in 2009. In that same year, CDFIs experienced a 1.3 percent charge-off rate for business lending.

And while conventional financial institutions have all but put a complete halt to lending activity, community loan funds continue to see astounding portfolio growth. For example, Four Bands Community Fund located on the Cheyenne River Indian Reservation in South Dakota, nearly doubled its loan portfolio from 2010 to 2011. Lakota Funds, a community loan fund that serves the Pine Ridge Indian Reservation, recently surpassed the $6 million mark in lending, generating over 1,200 jobs and nearly 450 businesses.

In fact, there is so much activity on the reservation that Lakota Funds has a full-time staff dedicated to the construction contractor market. One local electrical contractor who leveraged a line of credit from Lakota Funds to break into the multi-million dollar public works sector now employs over 40 people. Just since last summer the reservation has a new barbershop, bakery and floral shop, dollar store, landscaping service, and a movie theater is on the way. These small businesses not only provide goods and services to the local residents, but they provide a sense of economic empowerment to individuals and families.

What makes Native loan funds mighty economic development engines is their mission driven focus on community development. As part of their lending program, they require their clients to complete training to build their personal financial skills and ensure greater success in their respective business ventures. This strategy not only creates a more financially literate and business savvy population, it creates a stronger local economy. This holistic approach to economic development has long been the trademark of Native community loan funds, and was recently coined the “all of the above strategy” at the White House Summit on Financial Capability and Empowerment.

The results of this strategy are evident in an analysis of various state and national data sources from 2000 to 2010 conducted by Dr. Michael McCurry of South Dakota State University. The study reveals the largest employment growth was seen on Pine Ridge and Cheyenne River Reservations where the state’s two longest-operating Native community loan funds are located. As a whole, the state’s reservations experienced a median income growth of 40 percent and an employment growth of 11 percent, while the state’s levels were at 27 percent and 7 percent.

Fortunately, the Battle of Little Bighorn was not the last victory for the Sioux. The practitioners working in the trenches of the Native economic development field celebrate small victories every day. They are changing the economic landscape of their reservations one job, one savings account, and one homeowner at a time. This is no easy feat, but the Sioux and other Indians around the nation are steadfast and determined to build thriving communities for their children and grandchildren.

Tanya Fiddler is the executive director of Four Bands Community Fund, Inc., a Native non-profit loan fund located on the Cheyenne River (Lakota) Sioux Reservation in South Dakota and is a nationally recognized expert in community and economic development in Indian Country. In May, she spoke at the White House Summit on Financial Capability and Empowerment.