A loan program that doesn't require collateral or a good credit rating is flourishing on the Pine Ridge Indian Reservation in southwestern South Dakota.
The Circle Banking Project began a year ago to encourage the development of small in-home businesses on the reservation. In this unique approach to lending, four to six borrowers form a group that participates in a six-week training program to learn business basics, self-worth and teamwork.
Group members are eligible to borrow up to $400 through the non-profit Lakota Fund, which administers the program. The only requirement is that the money be used for lawful, income-generating business purposes. They can receive a second loan for up to $800 in the first year as long as the first loan has been repaid.
The groups meet with a Lakota Fund staff person every other week to make loan payments and discuss their work. The program is working, according to Gerald Sherman, executive director of the Fund, "because they are responsible for each other. If somebody misses a payment, it's up to the group to see that the payment is made." If one of the members falls behind on payments, no one else in the group can take out a new loan.
In its first year of operation, the Circle Banking Project has lent $12,000 to 37 individuals and none of the loans has defaulted. Many of the loans have gone to individuals who are making traditional Indian crafts in their homes. Some of the loan recipients were already selling these homemade crafts, but often they had to sell one item in order to purchase supplies to make another. The loans have enabled them to buy additional supplies and build a small inventory.
Pearl Dull Knife used the money she borrowed to buy beading supplies. She makes shirts, earrings, moccasins and belt buckles in her home. Most of her crafts are sold by a friend who lives in California.
The project is patterned after the Grameen Bank of Bangladesh, which loans money to the poorest people of Bangladesh to develop small businesses in their homes. In existence for nearly 20 years, the Grameen Bank has made loans to 800,000 people with a 98 percent repayment rate.
Sherman says the project hasn't had time to have a real impact on the reservation's economy. "That will take a while," he says. "We've seen some progress toward long-term social change; the economic impact may come once we get more people selling their products off the reservation."
—Patti Lorenzen
