A Financial Remedy on the Reservation
How Native CDFIs are bringing affordable financing to Indian Country and cultivating community health.
By Natalie Orenstein
In 2013, the Lac du Flambeau Band of Lake Superior Chippewa Indians Tribal Council, in rural northern Wisconsin, declared a “state of emergency.” Abuse of synthetic and prescription drugs was rampant on the reservation. Suicide and crime rates had climbed in recent years.
Enough is enough, said the tribe, which launched a concerted effort to boost community health that spring. The council hired a tribal mental health consultant, ramped up treatment options, and opened new culturally sensitive clinics and rehab units.
The drug and suicide epidemic that the Lac du Flambeau tribe struggled to overcome is a symptom of a larger struggle — one of discrimination, federal policy neglect, and resulting intergenerational poverty. The painful history has produced a tangled web of poor health and economic hardship in Native communities. High unemployment rates on reservations are paralleled by high prevalence of tuberculosis, cervical and breast cancer, and alcohol abuse. Native Americans are more than twice as likely as whites to have diabetes, for example.
“Epigenetics and intergenerational trauma play a huge role in the health disparities faced by Native people,” said Brandon Thoms, spokesman for the Gookomis Endaad healing center, a product of the Lac du Flambeau health push. The residential rehab program fuses contemporary medicine with traditional healing methods like hunting and sweat lodges.
Native communities are increasingly focusing on their physical and economic health. Already at work in Lac du Flambeau during the emergency health effort was a financing institution called the Wisconsin Native Loan Fund (WNLF), which builds credit and financial literacy among members. Like many Native practitioners, staffers believe financial empowerment is a catalyst for overall community wellness. American Indians have been locked out of credit markets so long, staff say, that building self-sufficiency among residents is an important precursor to community improvement and, it might be said, a vital element in individual health.
WNLF is part of a growing network of Native Community Development Financial Institutions (CDFIs). CDFIs, certified by the US Department of Treasury CDFI Fund, are nongovernmental entities that blend public and private capital to spur economic development and opportunity in under-served communities. Certified Native CDFIs must direct at least half of their services to American Indians.
“Epigenetics and intergenerational trauma play a huge role in the health disparities faced by Native people.”
Native CDFIs have been around for decades but began expanding around 2000, when a CDFI Fund study on access to lending in Native communities led to the creation of the Native Initiatives. The program provides funding, technical assistance, and training to Native CDFIs.
In contrast to many of their mainstream counterparts, some Native CDFIs focus primarily on individuals and families, rather than larger-scale development endeavors, as a first step in addressing family and community poverty. Some emphasize business development and micro-lending, others consumer and homebuyer loans. Today, more than 70 CDFIs are scattered throughout Indian Country, with many more emerging.
CDFIs Break Down Barriers to Building Wealth
The Northwoods of Wisconsin is blessed with thousands of serene lakes and — despite once serving as a logging capital — millions of acres of forest. It is no surprise that it is a popular destination for tourists and, for those who can bear the brutal winters, retirees.
Next door to the vacation homes and outdoor sports sites are Native communities living with what Donna Fabiani, executive vice president of knowledge sharing at the Opportunity Finance Network (OFN), characterizes as “utter lack of employment and an intensely high poverty rate.” In the United States, one-quarter of all Native Americans are living in poverty, according to Pew Research (a rate 70 percent higher than the 2014 national poverty rate of 14.8 percent). The unemployment rate is higher than all other ethnic groups.
On Wisconsin reservations, many people who are employed work for the tribe — either in government departments or for gaming operations. Others make a small income by selling their own goods, such as food or crafts. But unemployment lingers and is one of many barriers to financial and physical health.
“Payday lending is astronomical” on reservations.
Conventional means of wealth building are often inaccessible in Indian Country. According to the Federal Reserve Bank of Minneapolis, which works with Native communities: “Given the general geographic isolation of many reservations and historically low incomes and high unemployment rates of its residents, there is often little in the way of a viable banking market on many reservations.”
In addition, Native Americans often “don’t have the collateral or the credit score or the employment history that banks are looking for,” said Fern Orie, director of WNLF. “They have no other avenue to access financing for things like furniture and homes.” Many of Orie’s clients live in tribal-owned homes, which often need maintenance. Others own their homes but cannot use them as collateral because they are on government trust land, she said.
Even if individuals have credit, 86 percent of Native communities do not have a financial institution within their borders, according to the Native CDFI Network. “Payday lending is astronomical” on reservations, said Seth Julyan, vice president of membership at the Opportunity Finance Network.
The CDFI Fund’s support for Native financing, however, has enabled the emergence of a strong, culturally rooted alternative to the dismal banking landscape on reservations, said Tanya Fiddler, executive director of the Native CDFI Network, a policy advocacy and education organization.
Orie, an Oneida tribal member, founded WNLF eight years ago to fill the gaps in affordable financing in Lac du Flambeau. The CDFI has since expanded to provide loans and tax assistance on reservations statewide. Recently, a couple trying to buy their first home came to WNLF with serious debt. They thought they simply had high-interest credit cards, but with the help of WNLF’s counselors, they discovered they were paying 43.5 percent interest on a loan they had on their truck. Orie refinanced it.
“People don’t realize when they’re getting taken advantage of even more than they thought, and how much it’s preventing them from having assets and financial self-sufficiency,” she said. On the other hand, she added, some Elders she serves do not trust the banking system and have always dealt only with cash, but that approach is equally unsustainable in a financial system where good credit is critical.
Building a Network
The first Native CDFI in the 1980s, Lakota Funds in South Dakota, began as a micro-lender. Because their clients lacked a history of small businesses ownership, one of the first challenges was teaching business skills and helping them carve out entrepreneurial opportunities, Fabiani said.
There is much more familiarity with the CDFI concept now, thanks in part to swift word of mouth in the tight-knit communities, Orie said.
In addition to tax help and payday loan relief, the Northwest Native Development Fund (NNDF) in Nespelem, Washington, offers entrepreneurship training and has provided hundreds of thousands of dollars in small business loans, which have helped clients launch an Indian construction company and open a dental clinic. At the Four Bands Community Fund on the Cheyenne River reservation in South Dakota, the CDFI supports an entrepreneurial internship program for youth, which has been replicated on other reservations. The large youth population needed employment, and micro-businesses needed employees but could not afford them. The youth receive a stipend and save half of it, which is matched by the CDFI in funds for higher education. The tribe has adopted some of Four Bands’ practices, integrating financial literacy into its K-12 school curriculum.
Some Native CDFIs fund larger community development projects. Lakota Funds’ 30-unit housing complex was the first Native American tax-credit-financed, low-income housing project. On some reservations, tribal members have founded community development corporations to tackle economic and health disparities with large-scale investments. The Thunder Valley CDC on South Dakota’s Pine Ridge reservation, for example, has financed infrastructure and housing improvements.
Eighty-six percent of Native communities do not have a financial institution within their borders.
Native CDFIs frequently encounter hurdles that their non-Native, urban counterparts rarely face. They struggle, for example, to access state development dollars, Fiddler said. They do not receive the support granted to some mainstream CDFIs by bank foundations, which under the Community Reinvestment Act are required to serve organizations in their geographic footprint. Lack of infrastructure is also an issue in the rural Native CDFI settings, Julyan said. Lending institutions can only reach so many people without access to the internet, for example.
But their unique understanding of the communities they work in has helped Native CDFIs gain traction.
“We’re deeper in the communities and have built partnerships with tribes,” Orie said, “so we’re able to understand more closely what people’s issues and concerns are, and where they would like the help.”
Stopping Cycles of Poverty and Poor Health
Fiddler has been thinking about the impact of childhood trauma on families and economic well-being. A tribal member of the Cheyenne River Sioux, she and her siblings were raised by a single mother who struggled with alcoholism. When you take the historical trauma and “couple that with racism that continues to re-traumatize Native people,” you don’t exactly have a fertile ground for financial self-sufficiency, Fiddler said.
That’s why, for community financial practitioners in Indian Country, poor mental health and poverty are two sides of the same coin.
“It all is tied together in my mind,” Orie said. “We know that stress is a huge component of health and it’s often financial stress. A person might lose their job then turn to drugs or alcohol. It’s part of the systemic health of the whole community and each individual is a spoke on the wheel.”
Jason Purnell, professor at Washington University of St. Louis, has studied the deep connections between financial, physical, and mental health. When the American Psychological Association conducted its “Stress in America” survey, he reports, they found that financial stress topped the list. Nearly one-third of those who worried about money also said the financial worries and instability affected their ability to lead a healthy lifestyle. Many cope by smoking, eating, drinking alcohol, and not getting enough exercise, he reports.
“We know that stress is a huge component of health and it’s often financial stress. A person might lose their job then turn to drugs or alcohol. It’s part of the systemic health of the whole community.”
That kind of stress, paired with a history of trauma, is the backdrop to many successful tribal health and financial empowerment efforts that have begun to receive recognition. The Lac du Flambeau project and the Menominee Nation’s trauma-informed approach to social services were both awarded Culture of Health prizes from the Robert Wood Johnson Foundation, which supports community health initiatives.
And the positive momentum is evident. Overall economic growth in Indian Country has outpaced the rest of the nation in recent years, but there is still a lot of catch-up to do. CDFIs are among the forces pushing the communities forward.
Said Fiddler: “There is a swift change taking place.”
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