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Financial Times: Cut in BIA loan guarantee fund hits tribes

"The Delaware Nation has a simple idea for creating jobs for the 60 per cent of its members who are unemployed – it wants to manufacture lighting. However, no one will lend this Native American community the money to get started.

“Banks won’t take any risk whatsoever with us. Unless you have twice as much in assets than what you are loaning, they are not interested,” says Kerry Holton, the tribe’s president. The 1,500-strong community is one of many Native American victims of the freeze in credit markets, which has hit tribes – seen as a risky investment as they tend to rely on a single revenue stream – more intensely than any other group. And it is about to get worse.

President Barack Obama’s administration is cutting dramatically the Indian loan guarantee programme, which backs tribal loans for up to 90 per cent of the risk. For fiscal year 2012, the programme will be slashed by nearly two-thirds to $3m, down from the $8m allocated in 2010. According to the White House office of management and budget, this $3m will only guarantee $25m in loans, down from $90m under current levels. “The budget realities that we’re in right now require some reductions,” said Larry Echo Hawk, assistant secretary of the interior for Indian affairs, when the budget was proposed in March. Mr Obama had originally increased the amount available in the stimulus package but because banks were not lending even with these guarantees it was taken as a sign that tribal communities were not interested in attracting investment. "

Get the Story:
Lights go out for Native American hopes (The Financial Times 5/22)

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