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Community Developments Investments (August 2013)

  This hunting lodge and cabins complex is one of the small business projects financed by the Four Bands Community Fund.  Four Bands Community Fund
This hunting lodge and cabins complex is one of the small business projects financed by the Four Bands Community Fund.

Working Together: Effective Partnerships Between Native CDFIs and Banks Bridge the Financing Gap in Indian Country

Tanya Fiddler, Executive Director, Four Bands Community Fund

High poverty and unemployment rates and limited physical, legal, and financial infrastructure mark the Indian reservations scattered throughout the country. A significant portion of Native American populations living in these reservation communities struggle daily to meet basic needs for food, water, and shelter. A movement that began gaining momentum in the early 2000s is beginning to turn the tide, however, by providing access to lending products and fundamental financial education. This movement, led by Native community development financial institutions (CDFI), is building a financial infrastructure where there once was none.

Take, for example, the Cheyenne River Indian Reservation, an area about the size of Connecticut. Located in Dewey and Ziebach counties in north–central South Dakota, the Cheyenne River Indian Reservation is home to an estimated 8,407 people as of 2012, including 6,146 Native Americans—73.1 percent of the population.1 For the 2007–2011 period, in Ziebach County—among the country’s poorest—43.5 percent of the population lived below the poverty level, while Dewey County reported a 30.3 percent poverty level. For the same period, South Dakota and the United States reported 13.8 and 14.3 percent poverty levels, respectively.2

According to the U.S. Census Bureau’s 2007–2011 American Community Survey 5-Year Estimates (table 1), the median household income for Dewey and Ziebach counties is $30,645 and $27,917, respectively. For the same period, South Dakota and the United States reported median household income of $48,010 and $52,762, respectively.3 In the same survey and for the same period, Dewey and Ziebach counties posted unemployment rates of 20.3 percent and 27.1 percent, respectively—multiple times the unemployment rates for South Dakota (4.8 percent) and the United States (8.7 percent).4 A starker picture, however, is portrayed in the last labor survey conducted in 2005 by the U.S. Bureau of Indian Affairs, which estimated 88 percent of the labor force on the Cheyenne River Reservation to be unemployed.5

Table 1: 2007-2011 Economic Characteristics of Cheyenne River Reservation Counties, South Dakota, and the United States

Population characteristic Dewey County Ziebach County South Dakota United States
Persons below poverty level





Median household income





Unemployment rate





Source: U.S. Census Bureau

Most of the reservation’s residents operate on a cash-only basis and have little experience with banks, savings accounts, or effective use of credit. With little financial experience, residents become easy targets for predatory lenders—payday lenders, check cashers, high-interest credit card companies, and pawnshops. It is not uncommon for residents to receive offers in the mail for credit cards with 80 percent interest rates or such high fees that, in some cases, the borrower is left with $50 out of a $250 line of credit.

Payroll deduction programs available from the tribe—a major employer on the reservation—and other employers further exacerbate the problem by enabling individuals to commit significant portions of their paychecks in advance for many types of purchases—often non-necessities. Although the payroll deduction program was intended to provide financial assistance in the face of an emergency, people use the program to purchase furniture or electronics on credit and are left with fewer dollars for day-to-day living expenses.

Four Bands Community Fund, a Native CDFI in Eagle Butte, S.D., has developed products and services to help overcome the challenges of poverty and unemployment that the residents of the Cheyenne River Indian Reservation (figure 1) face. Four Bands was born out of the Cheyenne River Sioux Tribe’s Planning Department and was incorporated in 2000 as a 501(c)(3) nonprofit organization. As a separate entity and an independent organization chartered by the tribe and the state of South Dakota, Four Bands is free of political influence from the tribal system. The organization has formed a strategic relationship with the tribe, however, to ensure that the CDFI’s programs and services are aligned with the tribe’s overall economic development planning efforts.

Figure 1: Cheyenne River Indian Reservation Communities

Map of Cheyenne River Reservation Communities

Source: Four Bands Community Fund.

With intimate knowledge of the unique circumstances on the reservation and with more than a decade of experience working in a rural, economically distressed area, Four Bands has become the leading organization on the Cheyenne River Indian Reservation in the areas of small business development, business lending, financial literacy, and entrepreneurship education. A small nonprofit organization with a staff of nine, this organization has dramatically transformed the economic landscape of the Cheyenne River Indian Reservation.

Through the end of 2012, Four Bands had served nearly 4,000 clients and disbursed approximately 580 microloans, small business loans, and credit-builder loans totaling $4.1 million. Since its inception in 2000, Four Bands, through its lending products, has contributed to the establishment or expansion of more than 100 Native-owned businesses and the creation or retention of more than 400 jobs on the Cheyenne River Indian Reservation. Since 2005, its individual development account (IDA), or matched-savings, program has committed more than $400,000 to help more than 100 people achieve asset-based savings goals. Thousands of adults and youths have completed financial education training, and more than 300 individuals have completed a comprehensive business development course. Through a partnership with the five reservation schools, more than 2,000 students have been exposed to financial literacy and entrepreneurship concepts.

Through all of this, Four Bands, like other Native CDFIs, has been changing the unbanked and underbanked population into banked individuals and families. As a result, individuals who may never have had a bank account have enrolled in the IDA program and opened savings accounts, and individuals who may have had only a personal savings account have started a business and opened personal and business checking accounts. In addition, Native CDFIs have been helping their local business communities grow. It is not uncommon for a CDFI business client to transition into mainstream banking for larger or more complex loan products.

While Native CDFIs have helped ease the lack of access to capital and financial resources that plague reservation communities throughout the country, the impact of these small nonprofit organizations remains limited. The fact is, mainstream banking institutions rarely, if ever, engage reservation communities, but these banks’ investments are needed to push economic development on the reservations to the next level. The problem is that, for mainstream banks, Indian Country is unfamiliar and risky territory, with layers of complex issues such as tribal sovereignty and multi-jurisdictional areas. A majority of the potential lending opportunities are for start-ups, and those loans carry significant amounts of risk—especially if the lender does not know how to recapture losses through tribal court. Native CDFIs, however, can help: They are local experts and have the relationships and experience in place to navigate these systems. Because their programs are designed to mitigate risk, Native CDFIs can serve as protective layers as well as beneficial partners for banks wishing to invest in Indian Country.

Until recently, Four Bands’ limited relationship with banks was typical for a Native CDFI: We partnered with local banks to administer our matched savings program. (Because most Native CDFIs are revolving loan funds and do not offer depository services, the organizations work with nearby banks, where matched-savings program participants open savings accounts and make regular monthly deposits.)

In 2012, Four Bands pioneered a new investment strategy with 1st Financial Bank USA in Dupree, S.D. Because Native CDFIs are mission-driven, they offer development services, such as financial education and business training, that banks do not. In April and May of 2012, 1st Financial Bank took an active role in a series of financial education courses that Four Bands delivered to nearly 300 tribal employees. Not only did the bank financially support the training to cover curriculum purchases and a portion of the staff time, bankers from 1st Financial were on site at the training sessions. As the trainer discussed budgeting or checking and savings accounts, bankers had the opportunity to answer specific questions about their banks’ products and services. This partnership combined the best of both worlds—nonprofit mission and for-profit banking services—to invest in the human capital on the Cheyenne River Indian Reservation.

The Citi Foundation has also been a leader in Native investment strategies. Through a grant, it is the primary funder of the South Dakota Native Entrepreneur Investment Fund, the first statewide lending program designed for Native communities. With a substantial investment from Citi, the South Dakota Indian Business Alliance is piloting the investment fund this year based on the successful Native CDFI model. As a result, 10 participants will obtain credit-builder loans and improve their credit scores, 25 participants will complete business plans, and 15 participants will obtain microenterprise loans.

There are other ways banks can invest in Native communities too. For example, banks can provide low-cost long-term capital that Native CDFIs can relend. In this strategy, banks can meet their CRA requirements and Native CDFIs can increase business activity and create jobs in their communities. Bank of America has done well in this arena, although its footprint doesn’t cover all reservation communities.

Participation loans are another way Native CDFIs and banks can come together. As businesses keep growing in Indian Country, participation loans may become common. For example, a Native entrepreneur may grow his or her business to the point where capital needs exceed what the local Native CDFI can provide. Say the entrepreneur needs to make a large equipment purchase of $350,000 to expand the business. While he or she may have built a positive history with the local Native CDFI, the CDFI cannot make a loan for this amount. (Native CDFIs typically focus on microlending and small business loans. Currently, Four Bands’ maximum loan amount is $250,000.) In this situation, a bank could take first position on a participation loan and the Native CDFI could take a soft second position; both share the risks and profits, while the reservation economy grows a little bit more.


There is a lot of potential for banks and Native CDFIs to form symbiotic relationships, in which each partner benefits. It comes down to this: Native CDFIs have what banks need to break into Indian Country—knowledge and ground-level experience. Banks have what Native CDFIs need to keep effecting change in their communities—capital and expertise.

Working together, these two types of financial institutions can have a far greater impact than one working alone.

Tanya Fiddler, Executive Director of the Four Bands Community Fund, 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.

1U.S. Census Bureau, State and County Quick Facts, South Dakota.
4U.S. Census Bureau, Selected Economic Characteristics, 2007-2011 American Community Survey 5-Year Estimate, DP03.
5U.S. Bureau of Indian Affairs, Office of Indian Services, 2005 American Indian Population and Labor Force Report.


Native community development financial institutions (Native CDFIs) provide access to capital, credit, and other financial services to Native American, Alaska Native, and Native Hawaiian communities (collectively, Native communities). Native CDFIs include banks, credit unions, and nondepository institutions, such as loan funds and venture capital funds, that direct at least 50 percent of their activities to Native communities.

The CDFI Fund, part of the U.S. Department of the Treasury, was established by the Riegle Community Development and Regulatory Improvement Act of 1994. It has played an ever-increasing role in the economic development of Native communities by providing grants and technical assistance to Native CDFIs. In the November 2001 “Native American Lending Study,” the CDFI Fund identified barriers preventing access to capital, credit, and financial services for Native peoples and provided recommendations to address these issues.

Since the release of the lending study, the CDFI Fund, through its Native American Initiatives, has embarked on initiatives designed to overcome these barriers by supporting Native CDFIs. To date, the program has funded 335 awards (primarily grants) totaling more than $80 million to 168 Native CDFIs with the intent to increase access to affordable capital and credit in Native communities. In 2012, the CDFI Fund awarded more than $11 million in grants to 33 Native CDFIs throughout the United States.

The CDFI Fund provides funding to Native CDFIs in two ways: through financial assistance awards and technical assistance awards. Financial assistance is used by Native CDFIs to increase capital for lending to small businesses, to entrepreneurs, and for housing development. Technical assistance is used to increase operational capacity to serve Native communities. Further, the CDFI Fund supports Native CDFIs though capacity-building contracts that seek to foster the development of new Native CDFIs and strengthen the operational capacity of existing Native CDFIs.

The Lakota Funds show the positive effect a Native CDFI can have on its community. Aided by $2.3 million in financial and technical support from the CDFI Fund, the Lakota Funds have lent more than $6 million, helping create nearly 450 businesses and more than 1,200 jobs and making a substantial social and economic impact on the Pine Ridge Indian Reservation in South Dakota.

For more information about the CDFI Fund, including certification requirements and a list of certified CDFIs, please visit

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.