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Small Biz Boom: Commercial Lending to Indians on Rise

There is an expanding appetite for commercial lending on tribal trust lands, though potent barriers remain.

There is an expanding appetite for commercial lending on tribal trust lands, though potent barriers remain, according to the federal Office of the Comptroller of the Currency.

OCC, in its February 2016 Community Development Insights newsletter, said Indian country has been experiencing higher economic growth since the 1970s, with gains (while varying from region to region) in real per capita income, median household income, employment, infrastructure, and education.

“As a result,” the article says, “demand for business development in local markets and loans to support such development continues to rise in large parts of Indian country. Moreover, through self-determination, tribal governments and entities have gained experience in building and managing businesses, producing a cadre of American Indian professionals and government employees with valuable managerial and governance skills.”

OCC also cited as factors the Indian Gaming Regulatory Act (IGRA) of 1988, advances in oil and gas extraction technology, and the faster growth of the Native American population compared with the country as a whole. “This growth has produced a larger labor force participation rate compared with the country as a whole, which is a contributing factor for future economic and commercial growth.”

How much need is there for commercial and business lending on Indian homelands? “Although sources providing hard data for commercial activity in Indian country are scarce, there is plenty of anecdotal evidence pointing to severe shortages in commercial credit,” according to OCC, with the biggest challenge being access to capital.

There are success stories in tribal economic development, however. The OCC listed the Mississippi Band of Choctaw Indians, the Citizens Potawatomi Nation of Oklahoma, the Gila River Indian Community in Arizona, the Navajo Nation, and tribal corporations in Alaska as examples.

The Mississippi Choctaw manage “a portfolio comprising manufacturing, service, retail, and tourism enterprises. The tribe provides almost 6,000 permanent, full-time jobs for tribal members and nontribal employees. The tribe is one of the 10 largest employers in Mississippi, with an annual payroll of more than $100 million, and has reinvested more than $500 million in economic development projects in the state.”

Gila River “has successfully built a diversified economy based on proper resource management and principles of self-sufficiency. In addition to gaming ventures, the community has been successful in creating and sustaining business enterprises in areas including hospitality, services, utilities, telecommunications, and construction.”

The Citizen Potawatomi Nation “has several tribal enterprises that provide services to its citizens and create a substantial economic impact in its communities. With more than 2,000 employees, the Citizen Potawatomi Nation operates a variety of tribal enterprises, including First National Bank, Grand Casino Resort, Fire Lake Discount Foods, and the Citizen Potawatomi Community Development Corp.”

Other examples include “the Navajo Nation, which has national monuments and other scenic attractions on its reservation, and the Three Affiliated Tribes, which are developing tourism-related activities, including a cultural interpretation center.

“In addition, Alaska Native Corporations have a dominant presence in the construction and manufacturing sectors in Alaska, effectively using their status under the SBA 8(a) program in construction, telecommunications, and energy-related projects.”

In tribal governance, the issue of tribal sovereign immunity poses some challenges to commercial lending, but the article suggested a few things tribes and banks can use for successful strategies. They include establishing a Section 17 corporation, establishing a state-chartered corporation, or using tribal council appointments.