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Indian Start-Up Credit Unions Holding On

Indian credit union startups are in various stages of working toward remaining successful businesses.

The experiences of the most recently chartered American Indian-based credit unions have been a mixed bag. Two are well-capitalized and seem to be performing normally, while a third was merged into another credit union only two years after it opened.

All of the recent entrants have been quite small. The biggest of the three, Lakota Federal Credit Union, Kyle, S.D., had $4.3 million in assets as of March 31, 2013 and served 2,014 members. It specializes in auto lending, with used car finance far outpacing new car loans.

The institution was classified by its regulator as well capitalized, with a net worth of $371,000 or about 8.6 percent of assets. Interest rates were 8.67 percent for new cars, 9.25 percent for used cars, and 12.18 percent for the riskier unsecured loans.

Lakota Federal was sponsored by another financial institution on the Pine Ridge Reservation. The Lakota Funds is a community development financial institution (CDFI) that started lending in 1986. Lakota Federal has also become a CDFI eligible for grants of up to $1 million from the federal CDFI Fund.

Prior to certification, the maximum CDFI application amount was limited to $150,000. Currently, the credit union has a pending application to the CDFI Fund for $750,000 which would help it boost its lending power.

Whitney O’Rourke, the credit union’s manager, said the credit union and the Lakota Funds do not duplicate each other’s efforts, despite both being CDFIs. The Lakota Funds does business lending on Pine Ridge, while the credit union has focused on car loans.

“We’re doing really well for starting out,” she told ICTMN. “Membership has grown faster than the 500 members the CU initially projected after three years. It offers secured (collateralized) loans up to $25,000 and unsecured (signature loans) up to $5,000.”

She said the credit union hopes to expand its unsecured lending limit to $50,000 and to add mortgage lending at some point in the future. It would also like to offer checking accounts in the future.

Lakota Federal has one branch and four employees, all members of the Lakota tribe.

Northern Eagle Federal Credit Union, Nett Lake, Minn., was chartered in 2013 to serve the Bois Forte Band of Chippewa. It is quite small, with $785,000 in assets and 404 members as of March 31, according to National Credit Union Administration.

Northern Eagle specializes in unsecured loans and used car finance. It held $39,000 in unsecured loans on its balance sheet and $59,000 in used car loans.

Chippewa Eagle Federal Credit Union, Mount Pleasant, Mich., was opened in 2011 to serve the Saginaw Chippewa tribe. But on May 31, 2013, it ceased to function independently and was merged into Isabella Community Credit Union.

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The Johnny Appleseed Approach to Seed More Native Credit Unions

Chippewa Eagle board chairman Ron Douglas said his group found that starting a financial institution, even a cooperative owned by its members, was a difficult, daunting task, according to the media outlet the Morning Sun.

Another entrant to the ranks of new Native credit unions, Seneca Nation of Indians Federal Credit Union, is set to open three branches in western New York state in August.