First Nations Oweesta Corporation(FNOC) was incorporated in December 1999 as a subsidiary corporation of First Nations Development Institute, a national organization that has been focused on assisting tribes and other Native communities to access, control, create, leverage and retain financial assets. FNOC was launched to enhance Native communities access to financial capital through the development and/or expansion of Native community-based community development financial institutions. FNOC provides to qualified native community development financial institutions loan/investment capital, training and technical assistance.
FNOC, in partnership with National Community Capital Association has developed a training curriculum, Developing Strong CDFIs in Indian Country, to be delivered to Tribes and Native communities to assist them in organizing and implementing community development financial institutions. It has also, along with Fannie Mae Foundation developed a consumer financial literacy curriculum, Building Native Communities, Financial Skills for Families. In addition to developing the curriculum, FNOC has conducted numerous "train-the-trainers workshops that enable people employed at the local level to conduct the training in their own communities. As part of its effort to improve access to capital in Indian Country, First Nations believes that the foundation of self-reliant, economically healthy communities - now and for future generations - are households empowered with financial tools and skills. Lack of information about personal finance and credit is a serious economic barrier for many Native communities. As the facilitator of the Native American Financial Literacy Coalition, First Nations is working to overcome that barrier by supporting efforts to improve financial literacy education and awareness in Indian Country.
Role of Native Community Development Financial Institutions (NCDFIs)
Lack of access to capital and the lack of business and management experience are among the chief barriers to economic and business development in Indian Country. While there are needs for macro-financing structures for infrastructure development and large tribal enterprises, private, regional and local financial institution are key for Indian Country development.
®Tribes need institutions at the local and regional level to help form capital and provide accessible technical assistance. Tribes and communities need to develop their own institutions to begin to build their own wealth and management capability.
®NCDFIs can provide Capital for financing businesses, land acquisition, home-ownership and development, and community development projects. All help to create a healthy economy.
®NCDFIs leverage grants, bank loans and other sources of capital into the community.
®NCDFIs can build capacity of tribal members to improve access to credit, buy homes and develop and manage businesses.
My experience in the community development financial institution field began in 1985 with the development of The Lakota Fund which was started as a project of First Nations Development Institute. The Lakota Fund is a private, non-profit NCDFI on the Pine Ridge Indian Reservation in South Dakota. Pine Ridge is one of the poorest reservations in the nation. Many are aware of the problems that have persisted at Pine Ridge. Despite its environment The Lakota Fund is widely regarded as one of the most successful private sector initiatives in Indian Country. It was also the first private, non-profit microenterprise loan fund in Indian Country.
When The Lakota Fund began lending:
o85% of its borrowers had never had a checking or saving account;
o75% had never had a loan;
o95% had no business experience.
The Lakota Fund now:
®lends in amounts up to $200,000;
®has a loan capital fund of $3.5 million from foundations, corporations, private investors, and governmental sources;
®provides training and technical assistance.
®They have loss rates of less than 10%.
®Has been instrumental in starting the Pine Ridge Area Chamber of Commerce.
®Has developed an IDA program.
®Has developed a 30 unit low-income tax credit program
®Operates a Tribal Business Information Center.
How was The Lakota Fund able to do business lending in this environment when banks and other lenders could not? Simply, The Lakota Fund as well as other CDFIs are able to take on more risk than banks and other regulated financial institutions. CDFIs missions allows them to develop capacity among their borrowers. Their mission is to develop the market in underserved and economically distressed communities. Another important reason why most lenders have trouble lending in Indian Country is the security and collateral issues, especially for home mortgages. NCDFIs can safely make concessions which allow them to provide flexible financing for home buyers.
Many valuable lessons were learned from The Lakota Fundís experience. Lessons that have helped develop strategies for start-up NCDFIs such as Four Bands Community Fund on the Cheyenne River Reservation in South Dakota and others.
Other examples of the critical need for NCDFIs are the Navajo Partnership for Housing, Inc (NPH) and the Oglala Sioux Partnership for Housing (OSTPH). These nonprofit homeownership organizations, operate on the Navajo Nation and the Pine Ridge Indian Reservation, provide homebuyer education and assistance working with lenders to first-time homebuyers. Almost out of desperation, both organizations created small loans fund to fill the gap in lending market for interim construction financing.
OSTPH has also, on several occasions, provided first mortgages to home buyers. In all cases, OSTPH had worked with USDA/Rural Development to obtain a 502 loan for the home buyer but because of fractionated land issues the loan approval was delayed beyond two years. OSTPH was left with no other options, but to provide a first mortgage to the home buyers. When and if the land issues are resolved, OSTPH hopes to "sell" the loans to a conventional lender.
Although no lender would offer this type of loan product due to the perceived risks of construction lending on the reservations, NPH and OSTPH were perfectly situated to make these loans as local intermediaries familiar with the market. Both organizations have plans to expand their loan fund to meet other types of financing needs such as soft second mortgages and, eventually, first mortgages.
Role of Banks in Community Development
Banks can be a partner in community development; they can offer valuable lending experience and can provide funding and investments. But, because banks and credit unions are regulated financial institutions, they generally cannot be lenders to the markets that are served by NCDFIs. They cannot play the role as technical assistance providers nor can they risk lending to primarily start-up businesses or first time borrowers.
Role of the Department of Treasuryís CDFI Fund
Despite The Lakota Funds success, until recently, few Native communities had successfully developed and implemented NCDFIs. This was due, in part, to the tremendous effort and funding needed for start-up. Several changes in the environment has precipitated interest in NCDFI development: (1) The CDFI Fund has been instrumental as a catalyst for Native communities to begin the development and implementation of NCDFIs; (2) the knowledge of the CDFI field has grown substantially and, therefore, technical assistance for start-ups has improved. Some of the NCDFIs that have recently started are:
1. Four Bands Community Fund (Cheyenne River Sioux Tribe, SD)
2. Lac Courte OíReilles Credit Union (Wisconsin)
3. Four Direction Development Corporation (multi-tribe - Maine)
4. Affiliated Tribes of the Northwest Indians Revolving Loan Fund (WA)
5. Hochunk Community Development Corporation (Winnebago - NE)
6. Valley Credit Association (Duck Valley - Nevada)
7. Hopi Credit Association ( AZ)
8. OST Partnership for Housing (Pine Ridge, SD)
9. Navajo Partnership for Housing (Navajo Nation)
The CDFI Fundís NACTA Program (Native American Component for Technical Assistance) received an incredible 47 applications in the first round. This funding allows Tribes and Native communities funding to start NCDFIs. Tribes and Native communities must develop a two-year proposal that articulates their plan from organizing a NCDFI to implementation.
The importance of the CDFI Fund in assisting Native community development financial institutions cannot be overstated. There has been or is no other single agency that has created a focus for building community development financial institutions in Indian Country. Because of my experience working in economic development over the past 20 years, I know of no other effort than private or regional community development financial institutions that allow Native people to develop management and decision-making skills while building self-sufficiency. The CDFI Fund has been effective in facilitating growth of NCDFIs. It is important that Congress provide funding for the CDFI Fund in an amount of at least $125 million and that at least $5 million be set aside for Native communities to develop CDFIs.
Respectfully Submitted by:
Elsie M. Meeks, Executive Director
First Nations Oweesta Corporation
P.O. Box 280
Kyle, SD 57752
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