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Are Native CDFIs the Financial Institution of the Future?

Native CDFIs tend to be homegrown, and are run by tribal members that have expert knowledge for what reservation communities want and need.

Tribes have spent decades trying to get banks to open branches on reservations. They also have struggled to start their own banks and credit unions. It’s been a tough slog. Maybe there’s an easier way.

ICMN has counted about three dozen banks and credit unions opened by tribes, tribal entities or individual American Indians over the past generation. But in recent years, more than 70 tribally-focused financial institutions have opened. They are called community development financial institutions (CDFIs). Maybe they, or something like them, are the wave of the future.

What is a CDFI? It is a non-profit lender that makes economic development and housing loans. It does not take deposits as banks and credit unions do. It is the brainchild of the U.S. Treasury Department, which has a CDFI Fund to hatch these community-based lenders and push them out into their communities. Increasingly their focus includes Indian country as the Fund has focused on Native CDFIs.


Often Native CDFIs are homegrown, and are run by tribal members that have expert knowledge for what reservation communities want and need (something that not many bankers have).

Examples include the Lakota Funds, on the Oglala Lakota reservation in South Dakota, and the Four Bands Fund, based on the Cheyenne River Sioux Tribe reservation, also in South Dakota.

The CDFI Fund says its Native Initiatives program has provided $120 million in financial and technical assistance to Native CDFIs and provided 1,600 hours of training. A group must devote at least 50 percent of its efforts to activities that serve Native people to get a Native CDFI designation from the Fund. It says 73 Native CDFI certifications have been awarded as of January 2017, with many more in the pipeline.

Native CDFIs have their own association, the Native CDFI Network. And there is one Native CDFI whose business it is to fund other Native CDFIs. That’s the First Nations Oweesta Corp., which says in its 2016 annual report that it has made $11 million in loans to Native CDFIs and is launching a capital aggregate loan pool of $10 million.

The loan pool will be supported by a $1 million reserve and would offer a low interest loan or a combined loan/grant hybrid with a higher interest rate.

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Oweesta said it has made $1.62 million in loans to Native CDFIs in 2016, bringing its total loan portfolio to $7.96 million. It says this lending sparked 280 jobs, the creation of 60 new businesses, and four affordable housing units. It also says it has a tiny loan write-off percentage of .01 percent.

Of course, federal programs are subject to political debate and can end in a hurry. If Native CDFIs are to continue to grow and become self-sufficient, they need to have sources they can rely on for funding outside of the Fund. And, they need to be successful lenders with careful underwriting to bring in money for new lending efforts (these are called “revolving” loan funds as the money received to pay back loans is used to fund new ones).

Native CDFIs are starting to get some outside champions. The Center for Indian Country Development, an affiliate of the Minneapolis Fed, is one such. The Northwest Area Foundation is another.

The NWAF is an unusual foundation that devotes 40 percent of its funding to Native projects in its eight-state footprint.

The group’s 2017 annual report is devoted to Native CDFIs, which president and CEO Kevin Walker calls “engines of change” for Native communities. “They’re really a best-kept secret, both inside and outside of Native communities,” he feels.

NWAF has made $33.4 million in grants to Native CDFIs between 2012 and 2016. It has also started a website for Native CDFIs.

According to Walker, “Native CDFIs are dynamic and trusted partners for building assets and thriving economies in Indian country. They are weavers, connecting families, communities, and entrepreneurs to the resources necessary to bring dreams to life for multiple generations.”

Native CDFIs NWAF is funding include: