Overcoming Native lending barriers

WASHINGTON – The federal Community Development Financial Institutions Fund has awarded $4.4 million to 10 Native CDFIs, bringing its funding for the year to more than $16 million, and has embarked on a five-year strategic plan to overcome barriers to lending in Indian country.

Among the recipients in this round of funding are the Navajo Partnership for Housing, Gallup, N.M.; Four Bands Community Fund, Eagle Butte, S.D.; and the Sequoyah Fund, Cherokee, N.C. Each CDFI received $470,000.

The Sequoyah Fund plans to use the grant for mortgage lending and to increase its loan loss reserves. NPH and Four Bands also plan to use the funds to increase lending in their communities.

First Hawaiian Homes Federal Credit Union got the smallest grant, at $250,000. They will use it to increase financial and development services.

In all, Native CDFIs in eight states received grants from the fund, an agency of the Treasury Department.

A CDFI is a locally-based financial institution spurring economic development in distressed communities. Native CDFIs devote at least half their efforts to Native communities, and typically are small institutions averaging five employees.

Previous rounds of 2009 funding gave Native CDFIs $8.8 million from the federal stimulus program and $3.3 million in technical assistance.

Donna Gambrell, CDFI Fund director, said the number of Native CDFIs has boomed from 14 in 2001 to 50 in 2008. “In addition, there are now more than 60 other Native organizations on the path to becoming certified Native CDFIs.

“Native CDFIs are helping to transform their communities. They are creating businesses and jobs in places that desperately need them. They are providing financial education and business training to persons who have been excluded from our nation’s economic mainstream.”

The agency said that since 2002, the CDFI Fund has awarded “more than 175 grants totaling $31 million to Native CDFIs serving almost 100 Native communities.”

Funding for the strategic plan has been included in the administration’s fiscal 2010 budget proposals.

The plan has five objectives: To sustain and advance existing Native CDFIs; to give CDFIs better access to capital; to increase financial skills in Native communities; to increase interagency funding for CDFIs; and to update a lending study the fund did in 2001.

Components of the Native Initiatives include the Native American CDFI Assistance program (NACA) and the Expanding Native Opportunities training program.

The fund said NACA has two forms of funding – financial assistance grants that are generally used as lending capital, and technical assistance awards to emerging Native CDFIs.

The ENO program is used to help emerging CDFIs qualify for certification, and to increase the level of financial expertise in Native communities.

Since 2003, according to the fund, 235 Native communities have participated in workshops under ENO’s Native Communities Financing Initiative. One emphasis has been on developing Native credit unions.

Other training initiatives include helping develop Native Individual Development Accounts and Native entrepreneur and enterprise development.

The fund said demand for its programs has increased – requests for funding have risen from $6.7 million in fiscal 2007 to $14.7 million in fiscal 2008.

The average grant amount in the program has increased, quadrupling from $71,628 in fiscal 2002 to $283,704 in

fiscal 2008.

One of the ways the plan intends to help existing CDFIs is to prompt them to use other CDFI programs that have been underutilized in Indian country. These include the Bank Enterprise Award, the Capital Magnet Fund and the New Markets Tax Credit program.

The fund has awarded just $2.3 million to banks serving Native communities through the BET.

It will also seek to identify funding Native CDFIs can tap from other government programs, such as those run by the Department of the Interior, Department of Health and Human Services, and others.

The CDFI Fund will also update the Native American lending study it did in 2001, to be completed by 2012. That study identified 17 barriers to lending in Native communities.

“It is clear that significant progress has been made in overcoming certain barriers identified in the 2001 Native American Lending Study,” the fund said. “The CDFI Fund’s focus for the next five years will be to continue its work to overcome these barriers.”

The CDFI Fund has awarded nearly $1 billion to CDFIs and $21 billion to CDEs (community development entities) through the New Markets Tax Credit Program.