Partner with Native CDFIs: Five Reasons
Five Reasons to Partner with Native CDFIs for Long-Term Impact
We talked to leaders of banks, asset management firms, financial institutions, and other funders and partners about what convinced them to invest in Native CDFIs. It all comes down to successful long-term impact.
1. Native CDFIs Create Sustainable, Long-Term Economic Growth.
Native CDFIs are anchored in local culture and passionate about creating opportunities for long-term growth, understanding the needs of Native communities and growing the opportunities to respond.
They know how to bridge traditional cash economies and Native lifestyles with the financial mainstream. They also lay the groundwork for investment in Native communities by providing capital and financial assistance, education, and training.
The result is a powerful multiplier effect, which helps Native entrepreneurs and Native-led businesses thrive, creating good jobs, an expanded tax base, and new market opportunities.
2: They Change Lives Through More than Loans
In many cases, Native CDFIs are the first encounter Native families and individuals have with a financial institution. Native CDFIs help families reach financial stability through education, credit building, and savings.
Because Native CDFIs serve a large unbanked population, staff will frequently refer program participants to a nearby bank or credit union to open their first account and deposit money as part of a savings plan. Many of these new potential customers are the first in their generation to break a cycle of poverty and move toward building a life of self-determined economic prosperity and stability.
Other services and products, like youth savings accounts, financial education, and planning for college and other future events, widen the range of options, possibilities, and opportunities for families to choose for themselves and generations to come.
3: Native CDFIs Are the Smart Investment Choice
Looking closely at the financial outcomes of Native CDFIs, it is clear that in addition to their outsized positive impact, they are a smart business choice. They have lower-than-average default rates, strong net asset ratios, and low historical write-off and delinquency rates.
On paper, the strength of relationships that Native CDFIs have in the Native communities they serve translates into a business model with an edge.
The approach is holistic. Native CDFIs supplement lasting relationships with lenders with extended services, such as financial coaching and training, in conjunction with lending activities.
4: Native Economies Are Growing and Need More Access to Capital
Native CDFIs are being asked to respond to higher needs for capital. The need continues to grow. The gap was highlighted in a 2012 Access to Capital study of certified Native CDFIs by First Nations Oweesta Corporation, and was shown to have grown in a 2017 survey led by the Center for Indian Country Development at the Federal Reserve Bank of Minneapolis.
The 2017 survey showed that Native CDFIs needed an additional $48 million more than they were able to offer.
5: They Are Supported by Federal Government Agencies
A number of economic and community development programs can provide equity, loans, loan security, and other credit enhancements to help reduce any lending risk and provide worthwhile support:
Treasury supports partnerships with community financial institutions.
The U.S. Department of the Treasury’s CDFI Fund fosters partnerships and offers support through its Native Initiatives program. In many cases, if you work at a community bank and a Native CDFI is in your bank’s assessment area, your bank establishment could leverage public funds to support technical assistance, trainings, and more.
HUD can guarantee home loan portfolios.
Interested in growing your financial institution’s home loan portfolio? Section 184 in HUD’s Indian Home Loan Guarantee Program provides a 100 percent loan guarantee to ensure your financial institution’s investment held in Indian Country trust lands will be repaid in full in the event of foreclosure.