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Native American Capital was recently honored by the Native American Finance Officers Association (NAFOA) for its work with the Kickapoo Traditional Tribe of Texas (KTTT). Prior to this year, the tribe had been guaranteeing approximately $1.1 million in bank loans for tribal members. The bank charged tribal members an interest rate of as much as 16.5% and the tribe deducted the payments from tribal member’s payroll checks. At the same time, the tribe has a comparable amount in CDs on deposit with the same bank, earning substantially less. NAC helped the tribe establish a new tribally owned community development financial institution (CDFI) in 2008 as part of their economic development efforts. NAC then helped the tribe capitalize the new CDFI entity with $1.5 million in cash, thereby enabling the tribe to take control of the tribal member loan portfolio and significantly reduce the interest rate paid by tribal members by more than half. As a result, the new CDFI has instantly created an internally managed loan portfolio that will produce more than four times what the tribe was earning previously, while significantly reducing the amount of interest paid by tribal members on their loans.

NAC’s work with KTTT was led by NAC Managing Director Gavin Clarkson. NAFOA chose this transaction as its “Deal of the Year,” in part because it presents a model for other tribes to follow. Many tribes are guaranteeing loan portfolios at outside commercial banks on behalf of their tribal members. By setting up their own CDFI and operating it as a “tribal credit union”, a tribe can disintermediate its capital structure, directly support its members, reduce tribal member borrowing costs, and make reasonable profits on these loans.

To find out more about the project click on the following: