Native CDFIs were on the brink of a golden age.
The community development financial institutions that are the main source of credit for farmers, small business owners, housing developers and other enterprises in Indian Country were poised for a historic infusion of federal funding to ramp up their lending activity.
Now, much of that promised funding is being cut and clawed back. And yet, Native CDFIs are still poised to step up, with growing investor interest and creative financing structures that are helping the local lenders expand their impact.
“There is a way to invest now to create alpha. And Indian Country is ready,” says Kate Finn of the Tallgrass Institute out of the University of Colorado, Boulder, formerly known as First Peoples Worldwide. Finn urges investors to channel capital through CDFIs due to their strong community ties, flexible structures, and outsized impact.
With the pullback by the federal government, Tribal Benefit Agreements have emerged as a key tool for ensuring Native voices dictate how project development unfolds and what long-term resources communities receive in return, according to a new report from the Tallgrass Institute.
Tallgrass’s 2023 report, “Indigenizing Catalytic Capital,” positioned CDFIs not only as lenders but as designers of capital stacks that work for both Native communities and private investors looking to back tested models for climate resilience and economic inclusion (for background see, “Mobilizing capital in Indian Country”).
“They can be the nexus of relationships and good investment,” Finn says. “They’ve been there from the beginning—when an entrepreneur needed $500 to buy cookware or repair a truck. They hold the relationship in a way that’s necessary for impact to happen.”
Historic support
CDFIs across the country showed their importance in the Covid-19 shutdowns, when they were a vital channel for Paycheck Protection Program payments and other small business assistance.
During the Biden administration, the Treasury Department invested $234 million in Native-owned and Native-majority shareholder depository institutions through the Emergency Capital Investment Program (for background, see, “Treasury investments in CDFIs pave the way for strong impact and financial returns”).
In 2022, Treasury’s CDFI Fund launched a New Markets Tax Credit Native Initiative to increase allocations of the credits in Native communities. Overall, New Markets Tax Credits have mobilized investments of at least $1.8 billion in Indian Country.
Native lenders were also set to get a share of the $20 billion Greenhouse Gas Reduction Fund that was part of the Biden-era Inflation Reduction Act. The Native CDFI Network was selected by the Environmental Protection Agency to receive $400 million under the Clean Communities Investment Accelerator. The network is part of the litigation against the Trump-era EPA for freezing those funds from being disbursed from an account at Citibank. The plaintiffs are currently awaiting a ruling from an appeals court on a district judge’s injunction to force the government to release the funds.
That’s not the only funding the administration is seeking to claw back. The Trump administration plans to rescind $24 million—86% of Native American CDFI Assistance funds already approved for FY 2025. The proposed FY 2026 budget would eliminate the NACA program altogether. The White House’s proposed budget also would make dramatic cuts in the CDFI fund more broadly.
“Treasury may no longer be in position to fund CDFIs as it has in the past,” said Michael Ching of Spruce Root, a Native CDFI in southeast Alaska. Even so, he added “the value and performance CDFIs delivered—measurable impact, community resilience, and reliable returns—could prove attractive to other investors.”
Business demand
Nearly half of Indian country is “banking desert,” according to a 2024 study from the Philadelphia Federal Reserve study – 12 times the national average.
Predatory lenders have filled the gap. In just two states, 44 tribes rely on more than 50 high-cost lenders, said Dave Castillo of New Mexico-based Native Community Capital on a recent podcast. “It’s a near market failure,” he warned.
There is clear demand for financial services in Indian countries and Native CDFIs have been instrumental in meeting it. They have been financing housing, small businesses and infrastructure in places that traditional finance has overlooked.
Not only that, they have been generating outsized impact with limited resources. Every federal dollar invested in a Native CDFI draws an average of $8 in additional capital from private, philanthropic, or state sources.
Castillo called Native CDFIs “giant slayers,” punching above their weight to close financial gaps and rebuild local economies.
In Alaska, CDFIs like Spruce Root are channeling capital to indigenous communities in the region through tailored financing and technical support.
“CDFIs are flexible,” Ching told ImpactAlpha. “They can deploy creative finance structures coupled with business training, thereby fortifying their ability to repay.”
Spruce Root manages the Seacoast Trust, a $25 million fund supporting the Sustainable Southeast Partnership, a network focused on indigenous led stewardship. Governed by Tribal and community leaders, the trust provides flexible capital for initiatives such as land stewardship, workforce development, and ecological restoration.
The Seacoast Trust raised anchor capital from Sealaska and The Nature Conservancy and additional support from regional foundations such as the Rasmuson Foundation, Edgerton Foundation, and the Hewlett Foundation
In South Dakota, Akiptan a Native community development financial institution on the Cheyenne River Sioux Reservation in Eagle Butte, has loaned more than $27 million to businesses and producers in nearly 30 tribal communities (see, Lending to Native-led producers gives Akiptan an edge in regenerative agriculture (podcast).
Also in South Dakota, Siċaŋġu Co. is blending finance to restore a buffalo herd on the Rosebud Sioux tribal lands. Navajo Power, based on the Navajo Nation, is cutting tribal communities around the country into profits for renewable energy projects built on their lands. Raven Group’s Indigenous Outcomes Fund puts Indigenous communities in charge of designing social and climate programs for their benefit.
Tribal voice
Many of the 69 federally certified Native CDFIs around the country are helping negotiate the Tribal benefit agreements with private developers to ensure that tribes receive a fair share of jobs, income and decision making power from projects on their land.
Native CDFIs can play a key role in structuring such agreements, which outline how Tribes consent to and benefit from projects on their lands. The Tallgrass Institute report, “Tribal Benefits Ageements: Designing for Sovereignty,” emphasizes the important role of such agreements as federal funding and permitting protections being rolled back.
“TBAs and coordination with Tribal nations are critically important at this time–particularly as tools for project developers to de-risk a multi-year development process that can span administrations, states, and wide swings in policy,” the report says.
CDFIs, already trusted in their communities, can help structure or manage capital agreements that reflect Tribal priorities with legally binding contracts between Tribes and developers. “When investors can step in that way, it allows Native entrepreneurs to dream,” says Finn. “To dream past the next grant cycle. Past the next loan benchmark. And when you allow entrepreneurs to dream, that’s when the impact comes.”
