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Senate committee focuses on access to capital in Indian Country

Thursday, June 18, 2015

The Senate Committee on Indian Affairs hears from witnesses at an oversight hearing on June 16, 2015. Photo by Andrew Bahl for Indianz.Com

Federal support for economic initiatives called 'embarrassing'
By Andrew Bahl
Indianz.Com Staff Writer

The Senate Committee on Indian Affairs heard from tribal and business leaders on Wednesday on ways to improve access to capital in Indian Country

The hearing coincided with the Reservation Economic Summit, hosted by the National Center for American Indian Enterprise Development. Many attendees traveled to Capitol Hill for the testimony while others watched from the conference hotel across town.

“This committee has received testimony at prior hearings relating to economic development that accessing capital is still quite problematic for Indian and tribal businesses," said Sen. John Barrasso (R-Wyoming), the chairman of the panel.

Barrasso noted that the average unemployment rate in Indian Country hovers around 15 percent, nearly twice the national average. In Wyoming, the rate is much higher -- 67 percent of tribal members in his state lack jobs, he said.

Indianz.Com SoundCloud: Oversight Hearing on "Accessing Capital in Indian Country"

"Indian and tribally-owned businesses face unique challenges beyond those that non-Indian businesses, in general, face," said Barrasso, who delivered the keynote at RES DC earlier in the day.

Derek Watchman, the chairman of the National Center for American Indian Enterprise Development and a veteran of the banking industry, said some of those challenges can be addressed by tribes. He outlined several factors that could improve economic opportunity on reservations.

“In my experience, the fundamentals for tribal access to capital are: business friendly governance, reasonableness in exercising sovereign immunity and resolving disputes, and understanding of various types of financial assistance,” Watchman testified.

Derrick Watchman, chairman of the National Center for American Indian Enterprise Development, and Alejandra Castillo, the national director of the Minority Business Development Agency, testified at the June 16, 2015, hearing. Photo from SCIA / Flickr

Watchman also said increased funding for key federal initiatives, especially the loan guarantee program at the Bureau of Indian Affairs, will help tribal and Indian businesses. He urged lawmakers not to view the programs as “hand-outs."

“The federal funding provided has always been inadequate to meet Indian Country needs and often it has been dispensed through grants and mischaracterized as ‘hand-outs’ on which tribes ... can become dependent,” he said.

“This kind of outcome has got to change. The loan guarantee program is not a ‘hand out,'" Watchman added. "It’s a leveraging tool to incentivize private lenders to finance tribal projects.”

Ross Hill serves as the chief executive officer of Bank2, a financial institution owned and operated by the Chicksaw Nation of Oklahoma. He said that the BIA's loan guarantee program could address the capital deficit if key changes were made.

The Senate Committee on Indian Affairs held a listening session on the Buy Indian Act and Community Development Financial Institutions on June 16, 2015. Photo from SCIA / Flickr

“If the loan guarantee program were to operate at a high level it could provide what is needed for tribes,” Hill testified. “The program isn’t funded adequately and isn’t administered property. The BIA isn’t very accountable to its customer or the banks.”

The program receives about $8 million a year, enabling a guarantee of about $100 million in loans. Lawmakers said the allocation wasn't enough.

“Seven million dollars is next to nothing, it’s embarrassing,” Sen. Al Franken (D-Minnesota) said in calling for an increase in funding.

“Sometimes the tribes that need economic development the most are the worst credit risk," Franken observed. "I want to make sure that the tribes that need capital the most have the opportunity to have economic development on their land because they have such high unemployment rates.”

Alejandra Castillo, the national director of the Minority Business Development Agency, agreed that increasing the number of successful businesses will improve tribal self determination. Over 30 percent of her agency's work deals with tribal and Indian businesses, she told the committee.

“The best way to ensure self determination is to empower tribes," Castillo said, "and what better way to do that then to increase Native firms?”

Castillo added that policymakers need to examine ways to help tribal and Indian businesses succeed in the long term. “If we want to focus on helping businesses grow and thrive, we need to look at the bigger picture and look at capital from a growth perspective, not just helping them start but grow as well,” she said.

Kim Trujillo opened BOW-K’s, a flower and sweet shop, with a loan from a community development financial institution in South Dakota. Photo from Lakota Funds

The committee also focused on community development financial institutions commonly known as CDFIs. Organizations like Lakota Funds in South Dakota and Native American Community Development Corporation in Montana provide loans, grants and financial services to Indian entrepreneurs who are typically unable to secure capital from traditional sources like commercial banks.

But like the BIA's loan guarantee program, federal support remains low. The Department of Treasury only provides $15 million for the 70 CDFIs that serve Indian Country amounting to an average of $200,000 for each institution.

"This commitment from the federal government to early stage capital targeted to Indian Country is grossly underfunded," said Dante Desiderio, the executive director of the Native American Finance Officers Association.

Despite hearing about the obstacles, lawmakers expressed optimism that the testimony will translate into legislative action.

“Access to capital in Indian Country is an incredible inhibitor to increasing economy and reducing poverty,” said Sen. Jon Tester (D-Montana), the vice chairman of the committee. “You put down some clear recommendations and hopefully we can come up with some bipartisan solutions … to help the people sitting in the audience today.”

Committee Notice:
Oversight Hearing on "Accessing Capital in Indian Country" (July 17, 2015)