What is a Native CDFI

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What is a Native CDFI?

• The Lakota Funds
• Board of Directors Manual
• September 2008
• Adapted from Orientation for New Board Members by
  Opportunity Finance Network, 2006, and reprinted
  with permission from Opportunity Finance Network
  (www.opportunityfinance.net).

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What does CDFI stand for?

• Community
• Development
• Financial
• Institution

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Community Development means

• The Mission of a CDFI must be Community
  Development, which means serving
• Low and Moderate Income People and/or
• Low and Moderate Income Community(ies)
• CDFIs serve their community development mission
  by lending or investing for
• affordable housing
• micro and small businesses
• community facilities,
• individuals

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The F stands for Financial

• The primary activity of a CDFI is lending,
  investing, or providing financial services
• CDFIs develop financial products to meet the
  needs of their markets, such as business loans
  for Native entrepreneurs or construction loans
  for affordable housing
• CDFIs make loans that are riskier than
  traditional financial institutions are willing to
  make, often to unconventional borrowers
• CDFIs also provide technical assistance to
  borrowers, applicants and potential applicants

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What does Institution mean?

• CDFIs strive to become a permanent capital
  resource in their communities, because we believe
  that access to capital is part of long term
  solution to poverty alleviation.
• If loans arent available, it is very difficult
  to do some of the things that can help lift
  individuals and families out of poverty, such as
  start a business, purchase a home, or pay for a
  college education
• This means that CDFIs expect to be repaid! CDFIs
  and their Boards cannot avoid risk rather they
  must learn how to manage risk. Later, we will
  show you some tools that CDFI Boards use to
  manage risk constructively.

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What is a CDFI?

• Since Congress passed the . law in 1994, the
  U.S. Treasury Department has certified CDFIs. In
  this presentation, we use the term CDFI to
  include certified CDFIs and other non-government
  entities that use financial services to further a
  community development mission.

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What is a Native CDFI?

• Certified Native CDFI - is an entity that
  primarily serves (meaning, at least 50 percent of
  its activities are directed toward serving Native
  Americans, Alaska Natives and/or Native
  Hawaiians) a Native Community and is certified by
  the CDFI Fund.
• As of of August 2008, there were 46 Native CDFIs,
  including The Lakota Funds.

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Growth of Native CDFIs
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What do CDFIs do?

• CDFIs bring in money from various sources and
  lend it in the community
• When the loans are repaid, the money is lent
  again.
• This means that CDFIs expect to be re-paid.
• This is different from most nonprofits which
  raise funds to provide a service.
• Some CDFIs offer retail banking services such as
  checking and savings accounts
• CDFIs also provide Technical Assistance to
  borrowers potential applicants assistance that
  our target market requires and that conventional
  financial institutions do not provide. At TLF,
  WBI delivers much of the technical assistance.

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There are five different types of CDFIs, or CDFI
Sectors

• Community Development Credit Unions - promotes
  ownership of assets and savings to low-income
  individuals with special outreach to minority
  communities.
• Community Development Banks - Provides capital to
  rebuild economically distressed communities.
• Community Development Loan Funds - The most
  common type of CDFI, loan funds borrow capital at
  below market rates and lends this money to
  non-profit housing and business developers in
  distressed neighborhoods. TLF is a community
  development loan fund.

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The Five CDFI Sectors (cont.)

• Microenterprise Development Institutions - Focus
  is on small business development. Because a
  significant portion of their borrowers are
  start-up businesses, Microenterprise Development
  Institutions provide a lot of TA.
• Community Development Venture Capital Funds -
  Venture Capital Funds provides equity and debt
  with equity features for community real estate or
  business projects. The most recent to develop,
  Venture Capital Funds are interested in high
  growth potential as well as a social mission (
  i.e. job creation potential).

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The CDFI Industry

• There are approximately 1,000 CDFIs in the US
  under the generic definition of CDFI.
• There are 805 CDFIs that are certified by the
  U.S. Treasury Department as of August 1, 2008
  about 46 are Native CDFIs

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Size of the Industry

• 2006 study of 505 CDFIs
• 23.1B in assets (up from 13.1B in 2003)
• 15.3B in loans outstanding (8.4B in 2003)
• Portfolios are strong net charge offs .46 in
  2006

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Loan Funds

• 146 loan funds in 2006 study
• 3.4B in capital average total capital 24M
  median size 7.5 million
• 2.7B in loans outstanding 1.5B in loans
  originated in 2006
• 70 of loans outstanding are for housing
• Charge offs .7 in 2006
• Overwhelming majority of capital and operating
  support from private sector
• On average 31 equity, 69 debt

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What does this all add up to?

• In FY 2006, CDFIS
• Financed 8,185 businesses that created or
  retained 35,609 jobs
• Financed the construction or rehabilitation of
  69.893 units of affordable housing
• Built or renovated 750 community facilities, and
• Provided 32,738 alternatives to payday loans and
  helped 91,180 low income people open their first
  bank account

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What is CDFI Certification?

• Determination by the CDFI Fund that an
  organization meets eligibility criteria as a
  financial intermediary with a primary mission of
  community development
• Increases opportunities for access to capital
  from the CDFI Fund and others

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Certification Tests

• The organization must, at the time of
  application
• legally exist and
• meet all of 6 criteria (pass tests) for
• Primary mission
• Financing entity
• Target market
• Development services
• Accountability
• Non-government entity

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Special challenges

• Native CDFIs face special challenges that make
  their work more difficult
• The private economy is underdeveloped on
  Reservations. There are fewer private businesses
  and fewer homeownership opportunities
• Ownership of land is complex and often makes
  development and lending much more difficult
• Collections are more difficult. Many
  reservations do not have the legal infrastructure
  to support lending.

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And yet . . .

• Native CDFIs are successful!
• Over the past twenty years, TLF has
• Served over 3,600 Reservation residents. 
• Extended 650 loans to OST members 4.2 m.
• Created or maintained at least 850.
• Provided training and TA to 640 members.
• Launched an IDA program with a 21 match.
• Launched the Wawokiye Business Institute.

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ACCOMPLISHMENTS (Continued)

• Worked with Oglala Lakota College to implement
  CORE Four Business Planning course.
• Built and operated The Lakota Trade Center.
• Built and managed Eagle Nest Homes in Wanbli.
• Won the Northwest Area Foundations national
  Great Strides Award in 2005.
•  Since opening of Lakota Funds, Shannon County
  had the second fastest growth rate in employment
  of all South Dakota Counties.

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ACCOMPLISHMENTS (Continued)

• From 1996 to 2006, taxable sales in Shannon
  County, more than doubled, from 11 million to
  over 24 million.
• A quick estimate shows that the Oglala Lakota
  Tribe received almost 1 million in sales tax
  revenue in 2006 from small businesses.
• Lakota Funds is certified by the United States
  Department of the Treasury as a Community
  Development Finance Institution and is a member
  of the national Opportunity Finance Network.

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ACCOMPLISHMENTS (Continued)

• Lakota Funds is currently a recipient of funding
  from over 25 individual investors, five religious
  organizations, the Oneida Tribe, Citigroup,
  Walton Family Foundation, and Golden West
  Foundations as well as Housing and Urban
  Development, Administration for Native Americans,
  USDA, CDFI/NACA, and the Fannie Mae Corporation.
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