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Community Developments Investments (August 2013)

  With more than 5 million people and 566 sovereign tribal nations, Indian Country presents many opportunities for banks to do business.  National Congress of American Indians
With more than 5 million people and 566 sovereign tribal nations, Indian Country presents many opportunities for banks to do business. These opportunities are enhanced by several federal programs designed to encourage banks to lend and invest in Indian Country.

A Look Inside…

Barry Wides, Deputy Comptroller, Community Affairs, OCC

This issue of Community Developments Investments examines the availability of capital in Indian Country and the opportunities for banks interested in doing business there.1 While doing business on sovereign Indian lands may present some challenges, there are incentives that make investing and lending in Indian Country a profitable proposition.

By helping banks better understand the economic and banking landscapes in Indian Country, and by presenting examples of how other banks and financial institutions have experienced success working with Native communities, we hope to open the door to more investments and loans in places that need them most.

Before trying to understand the challenges and opportunities facing Native American communities, it is useful to review the economic condition of these communities.

Economic Landscape

The Community Development Financial Institutions (CDFI) Fund’s 2001 “Native American Lending Study” reflected the prevalent perception among Native Americans surveyed then that mortgages, home equity loans, business loans, and private equity investments were “difficult” or “impossible” to obtain.

More than a decade later, these perceptions have been confirmed by the National Congress of American Indians in its economic survey of Indian Country, which is highlighted in this newsletter. The article reports that while Native American economies have fared better in the last two decades than in the previous two, the Great Recession hit Native American communities hard and exposed holes in the economic and financial infrastructure of Indian Country.

Faced with depreciating real property values, tightening credit standards, and severe job losses, Native American communities are experiencing exceptionally high unemployment and poverty.

Who Is Doing Business in Indian Country?

Despite the financial contraction caused by the recession, some banks have been able to weather the storm and continue to extend loans and make investments in their markets, including Native communities. These banks have been able to do so because they understand the unique business dynamics and cultures of these communities and have been able to adapt and remain active partners during the downturn.

U.S. Bank, First National Bank Alaska, First National Bank & Trust of Shawnee, Okla., and Bank of Oklahoma provide examples of loans and investments they made in Indian Country in the last few years. Some of these banks took advantage of federal loan guarantee programs when underwriting mortgages and small business loans. Others used long-standing relationships and innovative approaches to doing business—all while making sure their investments and loans were underwritten on a safe and sound basis.

Financial services are not, however, the sole domain of banks. For years, nonprofit organizations and other financial institutions have entered the arena to help local community development efforts in Native communities by making small loans and providing technical assistance to Native individuals and small businesses. Native CDFIs are a type of these financial service providers. The Four Bands CDFI of South Dakota gives us an insight into the working of a Native CDFI by discussing the institution’s myriad efforts in helping South Dakota Native Americans obtain loans, learn about entrepreneurship, and receive financial education.

It is difficult for capital access to take hold in areas with no business rules or with rules that are not clear or enforceable. When it comes to lending and investment, it is important to have secured transactions codes in place so that lenders have a clear understanding of business rules in Indian Country. Not all tribes and Native communities have adopted uniform commercial codes or their necessary enforcement mechanisms. The Federal Reserve Bank of Minneapolis has done much work in this area and shares knowledge of the topic in this newsletter.

What Can Banks Do?

Banks with little or no experience doing business in Indian Country need not shy away from viable business opportunities just because of a lack of familiarity with Native American tribes or communities. There are several viable options banks can take to venture into this important community.

For example, banks can collaborate with Native CDFIs to provide loans, technical assistance, and financial education. Banks already well versed in U.S. Small Business Administration programs, such as the 7(a) loan guarantee program, can use the programs to extend loans to Native small businesses. Also, banks can take advantage of other federal loan guarantee programs to mitigate the risks of lending in Indian Country. This newsletter touches on three such programs: the U.S. Department of Housing and Urban Development’s Section 184 Indian Home Loan Guarantee Program; the U.S. Department of Agriculture’s Business and Industry Guaranteed Loan Program; and the U.S. Department of the Interior’s Loan Guarantee, Insurance, and Interest Subsidy Program.

And, because many of the census tracts on Indian reservations are considered low-income communities or are targeted for redevelopment by federal, state, local, or tribal governments, bank loans and investments in these areas may qualify for Community Reinvestment Act (CRA) consideration. In this newsletter, we provide a primer on the CRA and how it can serve as an added incentive for banks to lend and invest in Indian Country.

How the OCC Helps

In addition to capital access promotion, federal agencies play other constructive roles in these community development efforts. For example, in 2011 and 2012, the OCC—along with the Federal Reserve Bank and other federal and state agencies—organized a series of workshops around the United States called “Growing Economies in Indian Country.” The workshops provided opportunities for tribal leaders and community members to voice their concerns and venues for federal agencies to highlight programs available to tribes, Native businesses, and private, non-Native enterprises—including banks. Findings from the workshops were presented at a national summit hosted by the Federal Reserve Board in May 2012. Summit speakers reiterated the anecdotal evidence shared by workshop participants that capital for many in Indian Country continues to be difficult to access. For more information on the summit, click here.

The OCC has 14 district community affairs officers, located in four regions around the country, who offer assistance and consultation to national banks and federal savings associations on all issues related to community development, including those related to rural and tribal communities. For more information, see the Community Affairs home page.

In addition, our resource directory on Native American banking provides listings for a host of OCC and other federal agency resources on all facets of banking and finance. For example, tribes interested in founding or acquiring their own bank can consult our “Guide to Tribal Ownership of a National Bank.” Banks interested in learning more about lending opportunities in Indian Country may consult our report “Commercial Lending in Indian Country.” The Native American Banking Resource Directory can be accessed here.


Banks that consider Indian Country for business stand to reap more than profits. Loans and investments help create jobs, revitalize communities experiencing record unemployment, and open the door to local Native entrepreneurs seeking to build and grow businesses, pushing forward the wheel of growth.

We hope you find this publication useful, and for those banks located in or near a Native American community, we hope that after reading this publication you will have a renewed sense of confidence about doing business in Indian Country.

Barry Wides, Deputy Comptroller for Community Affairs, can be reached at

Community Developments Investments is produced by the OCC’s Community Affairs Department. Articles by non-OCC authors represent their own views and not necessarily the OCC’s.

1Indian Country includes all land within the limits of an Indian reservation under the jurisdiction of the U.S. government; all dependent Indian communities, such as the New Mexico pueblos; and all Indian allotments still in trust, whether they are located within reservations or not.

USDA B&I Program

Banks interested in doing business in Indian Country may want to consider the U.S. Department of Agriculture’s (USDA) Business and Industry Guaranteed Loan (B&I) Program. Designed to improve the economic and environmental climate in rural communities, this program bolsters the existing private credit structure through the guarantee of quality loans that provide lasting community benefits. Here is a summary of some of the program’s provisions.

  • A borrower must meet citizenship and residency requirements. The borrower may be a cooperative organization, corporation, partnership, or other legal entity organized and operated on a for-profit or nonprofit basis; an Indian tribe on a federal or state reservation, or another federally recognized tribal group; a public body; or an individual.
  • A borrower must provide employment; improve the economic or environmental climate; promote the conservation, development, and use of water for aquaculture; or reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems or other renewable energy systems.
  • Loan purposes include business and industrial acquisitions when the loan keeps the business from closing, prevents the loss of employment opportunities, or provides expanded job opportunities; business conversion, enlargement, repair, modernization, or development; purchase and development of land, easements, rights-of-way, buildings, or facilities; and purchase of equipment, leasehold improvements, machinery, supplies, or inventory.
  • The maximum guarantee percentage is 80 percent for loans of $5 million or less, 70 percent for loans between $5 million and $10 million, and 60 percent for loans exceeding $10 million.
  • The total amount one borrower may borrow from the program must not exceed $10 million. Please refer to the program guidelines for possible exceptions.
  • The maximum repayment term for loans on real estate cannot exceed 30 years; a machinery and equipment repayment term cannot exceed the useful life of the machinery and equipment purchased with loan funds or 15 years, whichever is less; and a working capital repayment term cannot exceed seven years.
  • The interest rate for the guaranteed loan is negotiated between the lender and the applicant and may be fixed or variable, so long as the rate is a legal rate. Interest rates are subject to USDA review and approval.
  • Collateral must have documented value sufficient to protect the interests of the lender and the USDA. The discounted collateral value is normally at least equal to the loan amount. Lenders must discount collateral consistent with sound loan-to-value policy.

For more information on the program, please refer to the USDA Rural Development Website.

Community Developments Investments is produced by the OCC’s Community Affairs Department. Articles by non-OCC authors represent their own views and not necessarily the OCC’s.