Author
Access to financial services recently got a lot easier for residents of the Pine Ridge Indian Reservation in southwestern South Dakota. Lakota Federal Credit Union (LFCU), the first federally insured consumer financial institution ever established on Pine Ridge, opened for business in November 2012, after more than three years of planning and preparations. While the new credit union was created to meet specific and immediate needs, its supporters predict it will have the broader, long-term effect of promoting economic development in the Pine Ridge community.
Needs, barriers, and partners
A survey conducted in 2012 found that 60 percent of Pine Ridge residents had little or no relationship with a bank—an unsurprising figure, considering that prior to LFCU’s founding, there were no mainstream financial institutions on the remote, 3,500-square-mile reservation. Residents seeking basic financial services such as check cashing and consumer loans had two choices: resort to using high-fee, “fringe” banking outlets; or drive up to 60 miles each way to visit banks in off-reservation towns, where there weren’t many familiar faces.
“Distance was an issue, but also fear of the unknown. We recognized that creating our own financial institution would help eliminate those two barriers right there,” says Tawney Brunsch, executive director of Lakota Funds, a nonprofit community development financial institution*/ that has provided small business lending, financial education, and asset-building services on the reservation for more than 26 years.
Brunsch had joined Lakota Funds in 2008, after eight years as manager of the Wall, S.D., branch of Black Hills Federal Credit Union. She believed that the service-oriented, nonprofit mission of credit unions would be a good fit for the needs on Pine Ridge. In January 2009, with Lakota Funds acting as sponsor, Brunsch and several colleagues formed the LFCU Steering Committee, an entity charged with applying for and securing a charter from the National Credit Union Administration (NCUA).
Three existing credit unions in the region—Black Hills Federal Credit Union, Highmark Federal Credit Union, and Sentinel Federal Credit Union—served as mentors throughout the application process and, along with Lakota Funds, committed to being LFCU’s first depositors. Meanwhile, three consecutive awards from the U.S. Department of the Treasury’s Native American Community Development Financial Institution Assistance Program provided the steering committee with a total of nearly $450,000 to cover start-up costs and hire a full-time staffer, Whitney O’Rourke, who now serves as LFCU branch manager.
A menu of services
LFCU received its charter from the NCUA on August 29, 2012, and conducted a soft launch less than three months later. A grand opening is planned for spring 2013, once the new credit union has a few months of operation under its belt. Membership in LFCU is available to any of the estimated 40,000 people who live, work, worship, volunteer, or attend school on the Pine Ridge reservation. Organizations located within the boundaries of the reservation or organized to serve the people located within those boundaries also qualify for membership. LFCU is designated as a “low income” community development credit union, which means the majority of its members earn 80 percent or less of the national, nonmetropolitan median family income. The designation enables LFCU to accept nonmember deposits of loan capital, obtain grants and loans from the NCUA’s Community Development Revolving Loan Fund, offer secondary capital accounts, and qualify for exemptions from statutory limits on member business lending.
In addition to savings accounts, LFCU’s menu of services includes consumer loans, money orders, cashier’s checks, wire transfers, and prepaid debit cards. One LFCU offering—direct deposit—has arrived at a critical time, because starting on March 1, 2013, all Social Security checks and other federal benefits will be distributed electronically only.
“Elders were approaching us and expressing worries that their Social Security checks are going to stop coming,” Brunsch says. “It’s cool that we can tell them, ‘Your checks aren’t going away, just come open an account at the credit union and that’s where your checks will go.’”
More than just a savings account
LFCU is located on the first floor of the Lakota Trade Center in Kyle, S.D., in the heart of the reservation. Lakota Funds, which owns the building and donated the space to the credit union, occupies an office suite right upstairs. According to Brunsch, having LFCU so close by is a perfect complement to Lakota Funds’ services.
“We have people who come in and want to start or expand a business, but they’re using what we call the ‘shoebox’ method of tracking expenses and revenues, because they don’t have any kind of relationship with a bank. Now we can walk them downstairs and have them open accounts at the credit union.”
Brunsch’s long-term goal for LFCU is to enable community members to become more financially educated and empowered so they can help build a thriving economy on Pine Ridge.
“‘Economic development’ sounds so technical, but what it means to me is that we have individuals being more financially responsible, and able to better provide for themselves and their families,” she says. Once that happens, predicts Brunsch, those individuals will start businesses and create employment opportunities that make other people more financially stable. As the cycle repeats, the effects will multiply.
“I see that as a direct tie to the services that this credit union provides,” Brunsch says. “People think it’s just a savings account, but it’s so much more. I really see it as a means to financial stability and overall well-being.”
For more information on LFCU, visit www.lakotafunds.org.
*/ Community development financial institutions, or CDFIs, are specialized entities that provide lending, investments, and other financial services in economically distressed communities. For more on CDFIs, see our interview with Mary Mathews of the Entrepreneur Fund or visit www.minneapolisfed.org/community_education/cdfi.
