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The Lakota Fund, a loan fund serving the Pine Ridge Indian Reservation
(Pine Ridge) in South Dakota, is a major source of small business
capital for tribal members. Established in 1986 in response to a
high unemployment rate and a depressed local economy, the fund provides
loans and technical assistance to pursue its mission of developing
a private-sector economy on Pine Ridge.
Community Dividend discussed the economic development efforts
of the Lakota Fund with its executive director, Elsie Meeks.
Community Dividend: Economic development in Native American
communities presents many challenges. What are the greatest challenges
to Native small businesses and to the loan funds that serve them?
Elsie Meeks: The greatest challenge to Native small businesses
is a lack of experience in business, and the greatest challenge
to our loan fund is to build a business foundation. Most people
here have not even had the chance to work in a small business, let
alone run one. If people haven’t had the opportunity to work in
or run a business, how do they learn to be good managers? They must
learn from experience, and our work is about giving people that
experience.
CD: The Lakota Fund’s mission is to develop a private-sector
economy on Pine Ridge. How has this mission changed since the Lakota
Fund was founded?
Meeks: It hasn’t changed a lot, although we do see ourselves
becoming more of an economic development organization instead of
just a small business loan fund.
CD: Your economic development efforts involve providing
capital and technical assistance to very small businesses, or microenterprises.
How necessary are capital and technical assistance for microenterprises?
Meeks: In our experience, most people need capital and technical
assistance. That’s especially true if they want to expand their
business. Even if people have been operating microenterprises for
a period of time, we’ve found that most haven’t kept very good track
of their expenses and haven’t priced their products or services
in the right way. Sometimes, people can operate a microbusiness
without a loan by financing it themselves, but most people need
at least a short-term loan.
One thing I want to stress is that a microenterprise loan fund
shouldn’t be an end unto itself, but should be a tool used for growing
people’s expertise. I believe that there is one instance, in the
U.S., when microenterprise development is needed. That instance
is when people do not have credit viability or business experience.
Microenterprise development allows people their first entry into
credit and business, but it alone doesn’t create jobs or increase
income substantially. Although microenterprise is a tool that The
Lakota Fund utilizes, we identify ourselves as a small business
loan fund.
CD: Aside from small business loans and technical assistance,
what services do you provide?
Meeks: We provide small business training for people who
wish to borrow from the Lakota Fund. We provide credit counseling
and assist in workouts with creditors. For those interested in developing
a business plan, we provide access to computers and other business
resources through the Tribal Business Information Center. We also
provide assistance for people who want to obtain a loan for a house.
And we recently completed a 30-unit low-income tax credit housing
project, which was a whole new arena for us.
CD: How is the Lakota Fund managed?
Meeks: We have a nine-person board made up of enrolled members
of the Oglala Lakota Nation, with the exception of one member. The
outside position was designed so we could bring in some outside
expertise. So, eight of our board members are members of this tribe.
They’re community people, extremely committed to seeing positive
changes happen, and they’re very supportive of our vision. One of
the board positions is reserved for a tribally elected person. All
of the board members, except the elected person, serve on the loan
committee.
Our board is self-selecting, which means that it isn’t elected
by a public vote. The reason for this is that when we were organizing,
people didn’t want the fund to be modeled after tribal organizations.
Most tribal boards become too political, and we thought it was important
that we not be a political organization. And we are not connected
to tribal government in any way; we’re a private nonprofit. The
board hires the executive director, and the executive director hires
the staff.
CD: Is there anything that tribal governments should do
to assist tribally operated loan funds?
Meeks: The best thing that tribal governments can do is
to pass laws that assist small businesses—effective laws governing
collection of debt, checks, etc. If a tribe can provide capital,
it should provide it in a nonpolitical way. By that, I mean that
it should not have strings attached to the capital, and it should
not try to influence decisions that loan funds make.
CD: How does your loan approval process work?
Meeks: Anyone who wants a loan from The Lakota Fund must
complete our seven-week small business training program. This not
only provides good information and training for the potential businessperson,
it also tells us how committed someone is about starting a business.
After the training, if the person hasn’t completed a business plan,
staff assists them in completing it. At that point, the lending
director analyzes the person’s business plan and credit history.
If the borrower has an acceptable plan and debt-to-income ratio,
the application is taken to the loan committee for a decision. The
lending director has the authority to approve loans of $1,000 or
less.
CD: Do you work closely with your borrowers?
Meeks: Yes, very. That’s absolutely key to our success.
First, we get to know them through our small business training program.
After training, if they want to pursue their business idea and a
loan, we assist them in completing their business plan. If they
get a loan, we do quarterly site visits. We have a great staff that
is completely dedicated to helping people and to getting our loans
repaid.
CD: How can financial institutions become involved with
tribal loan funds?
Meeks: One way, of course, is to provide capital at a reasonable
rate for loan funds to relend, or perhaps contribute to a loan loss
reserve fund to help protect investments in the loan fund. Another
way is to lend their considerable expertise in business analysis
and underwriting. That would be a great help, because most reservation-based
loan funds have limited access to experienced business lenders.
CD: Have you noticed a change in the local economy resulting
from the capital and technical assistance that the fund has provided?
Meeks: To this point, we’ve been building a foundation by
teaching people basic business principles through training and microenterprises
and teaching them about credit. A foundation isn’t that visible,
but it’s very important. When we started, there were very few businesses
here and most, if not all, were owned by non-tribal members. Today,
there are many more businesses, and tribal members own almost all
of them.
CD: In 2006, The Lakota Fund will be 20 years old. How do
you see the fund operating in six years?
Meeks: I see us making larger loans to bigger businesses
in a more effective, efficient manner. We have made strides in building
the foundation. Now, we will become more effective, and our success
will be more visible.
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Annual Report
