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Get Your Loan On! Boomtown for Small Indian Financial Institutions

Native American community development financial institutions are gaining financial footing in Indian Country.
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While Native-owned banks and credit unions have not boomed in recent years despite the need for credit in Indian country, one type of local financial institution has seen its numbers increase five-fold in recent years: the Native CDFI (community development financial institution).

From just 14 in 2001, 70 Native CDFIs have now received certification from the CDFI Fund of the Treasury Department, making them eligible for a yearly set-aside from the federal government. And according to the Native CDFI Network, another 60 are in the works.

In fiscal 2014, the CDFI Fund awarded $10 million to 20 Native CDFIs, averaging $500,000 apiece, according to its website. In FY 2013, 35 CDFIs received $12.5 million.

CDFIs tend to be small financial institutions, loan funds that usually do not take deposits (But credit unions, which do take deposits, can be CDFIs.) and lend in low-income areas. Loans can be for real estate or businesses, among others.

The first Native CDFI, the Lakota Fund of Kyle, S.D., was established in 1986. “Our loan portfolio now exceeds $7 million, and our maximum loan size has grown to $300,000. Since 1986, we have helped thousands of artists and aspiring entrepreneurs, created over 1,400 permanent jobs, and helped establish hundreds of businesses,” the group says. In addition, the CDFI has sponsored a credit union, Lakota Federal, which is also a CDFI.

Despite the explosion of these institutions, Native CDFIs face some challenges, as shown by a recent webinar held by the Native CDFI Network. The Network’s president, Tanya Fiddler, a Cheyenne River Sioux Tribe member who also heads the Four Bands Community Fund on the CRST reservation, told webinar attendees that getting a match waiver from Treasury is a top priority.

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What this means is that a group wanting federal money from the CDFI Fund ordinarily must match that amount from private sources. There have been waivers of the match requirement in recent years, but it must be negotiated, and so far, it is not in the fiscal 2016 appropriations.

Fiddler pointed out that Native CDFIs often work in remote rural areas where there are no ready sources for such matches. “It’s a no brainer,” she said, of having the waiver extended. “We’re just beginning to create economies.”

Fiddler reported that in her travels she has received a CDFI endorsement from a high-level source. She met President Clinton at a meeting of the Clinton Global Initiative recently, and got an endorsement for funds for a second CDFI program, the New Market Tax Credit, from him. The NMTC was a program the Clinton administration sponsored back in the 1990s that is now in limbo.

Fiddler noted that the NMTC program has been underused in Indian country so far.

A third Native CDFI priority is getting the Native set-aside reauthorized. Lobbyist Alison Feighan told the webinar that the FY 2016 budget calls for an increase in Native CDI spending by $1 million to $16 million. But she said “$16 million is not a lot of money as the number of Native CDFIs continues to grow.”

She noted that President Obama had urged that the match requirement be waived for Native CDFIs, but said, “Congress needs to pass legislation to allow it.”