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.
