Using tailored services, Native CDFIs work to foster financial resilience

You need a loan, but the bank wants to see your credit score, employment history, and debt-to-income ratio. These standard measures of creditworthiness determine if you’re likely to repay what you borrow. But what if those measures don’t work for you?

For many individuals in Indian Country, traditional lending criteria may not fully capture their creditworthiness. That’s where Native Community Development Financial Institutions (CDFIs) step in. Instead of relying solely on conventional criteria, they sometimes evaluate borrowers using alternative criteria that reflect the realities of their communities. This flexibility is just one example of how Native CDFIs may use customized practices, products, or services to suit their clients’ needs. According to a study from the Center for Indian Country Development (CICD), a variety of tailored approaches are central to many Native CDFIs’ strategies and operations.

Working to foster trust and community well-being

Native CDFIs are financial institutions dedicated to meeting the unique needs of Native communities. They may be banks, credit unions, loan funds, or venture funds. These institutions go beyond traditional lending, offering culturally grounded financial services and technical assistance. Over the past three decades, Native CDFIs have emerged as vital players in Indian Country, where factors such as limited banking infrastructure, geographic isolation, and the legacy of historical economic disadvantages continue to hinder access to credit. Native CDFIs work toward filling the access gaps by fostering trust through culturally compatible practices.

Over the past several years, CICD has conducted a series of studies on the Native CDFI industry. This work is part of CICD’s mission to advance the economic self-determination and prosperity of Native nations and Indigenous communities through actionable data and research, and is grounded in the Federal Reserve Bank of Minneapolis’ broader mission to pursue an economy that works for all of us. A recent CICD working paper on Native CDFIs provides an in-depth look at the industry through qualitative interviews with leaders from 46 Native CDFI loan funds, representing approximately 62 percent of the Native CDFI sector. Conducted in collaboration with Oweesta, the longest-standing Native CDFI intermediary, the interviews explored a range of topics, including barriers would-be borrowers in Native communities encounter and features of the Native CDFI business model. A thematic analysis of the interviews, summarized in this article, provides insights into how Native CDFIs foster financial inclusion in Indian Country.

Prevalence of being unbanked is a key barrier

CICD’s Native CDFI interviews provide a better understanding of some of the barriers Native community members face in accessing lending and financial services in their communities. According to the working paper, the most prominent barrier, as highlighted directly by 28 percent of interviewees and referenced indirectly by almost all, is the prevalence of being unbanked or having a low credit score. One key factor in that is the absence of mainstream financial institutions on or near reservations. As one interviewee pointed out, “because of their fiduciary responsibility to protect depositors, banks can’t take too much risk. They tend to finance individuals who are already financially stable, leaving those striving to improve in a disadvantaged position.” Other significant barriers to accessing credit and capital in Native communities, highlighted by the interviewees, include geographic constraints and insufficient broadband access.

Native CDFIs’ “leave-no-client-behind” approach

The CICD working paper indicates that to address these barriers, Native CDFIs seem to have adopted a motto of “leave no client behind” that emphasizes their desire to help every community member achieve a better financial life. While a traditional CDFI may decline an applicant and move on, Native CDFIs tend to spend additional time working with individuals to ensure they can eventually qualify for a loan. The paper identifies core features of the Native CDFI model: holistic goals, customization of financial and developmental products and services, a strong emphasis on forging partnerships, and a comprehensive view of organizational and client success.

Holistic approach goes beyond lending

Overall, interviewees’ responses indicate that Native CDFIs take a holistic approach to financial empowerment that emphasizes not only individual creditworthiness but also aspects of individuals’ whole financial climate, such as equitable access to credit, economic self-sufficiency, and community resilience. Their strategic goals extend beyond lending to include financial education, entrepreneurship support, workforce development, and infrastructure investment, to ensure Native communities are connected with the resources they need to succeed.

Customization allows for tailored solutions

Nearly all interviewees—96 percent—indicated that they customize their financial products to individuals and communities they serve in order to ensure they are responsive to the unique needs of their clientele. Native CDFIs’ flexibility allows them to provide tailored solutions, such as workforce support loans, seasonal payment structures for fishermen or loggers, and credit-building programs. Many Native CDFIs adjust loan terms by offering low interest rates, allowing longer repayment periods, and accepting alternative forms of collateral, such as tribal distribution payments or personal leave pay. Additionally, several interviewees mentioned that their Native CDFIs offer land buy-back loans to tribes, specialized loan products aimed at assisting tribes in reclaiming tribal lands.

Interviewees indicated that in addition to offering financial products, their Native CDFIs provide developmental products and services: financial education classes, individual coaching, tax clinics, feasibility studies for Native businesses, business development support, technical courses aimed at imparting skills for high-paying jobs, small business digital marketing classes, business development classes, entrepreneurship incubators, and broader community development services. Among these offerings, Native CDFIs prioritize financial education and technical support in order to equip clients with tools to make informed decisions. With this approach, they aim to strengthen both financial resilience and broader community involvement.

According to 89 percent of interviewees, their Native CDFIs purposefully tailor the developmental products and services they offer. Many Native CDFIs also adapt training locations, schedules, and curricula to increase accessibility and relevance through culturally aligned learning. One interviewee noted that their team “blends culture with finance.” Several interviewees emphasized their efforts to seamlessly integrate culture and business without exploiting culture inappropriately for profit.

Partnerships expand the impact

The working paper indicates that Native CDFIs often rely on partnerships to overcome staffing and resource constraints. They expand their impact by collaborating with other Native CDFIs, conventional lenders, nonprofits, government agencies, and tribal organizations. Among interviewees, 85 percent indicated that partnerships are a key component of their work.

Measuring success differently

Native CDFIs still focus on their bottom lines, like traditional financial institutions do. But Native CDFIs measure success in broader terms using client-centered metrics, metrics based on Native CDFI characteristics, and metrics for gauging performance of products and services. Client-centered metrics include the count of individuals, businesses, and families helped; the number of new homeowners created; the number of people who have received financial counseling; and the credit scores and income levels of clients. Metrics based on Native CDFI characteristics include number of staff members, amount of funds raised, and level of delinquency rates. The metrics for gauging performance of products and services include loan sizes and total dollars deployed, loan repayment rates, and number of business plans completed with Native CDFI assistance.

Many of these metrics look like ones you would see at a traditional financial institution, while other metrics reflect the unique approaches of Native CDFIs. These outcomes reflect the holistic mission of Native CDFIs to empower Native communities socially and economically. CICD’s interviews show that Native CDFIs adopt the view that true success encompasses a rich tapestry of individual and communal achievements, and Native CDFIs are dedicated to helping their clients weave this tapestry for a brighter and more secure future.

Fostering stronger Native communities

CICD’s Native CDFI interviews and resulting working paper shed light on Native CDFIs’ unique features and success metrics. The interviews suggest that Native CDFIs play a role in Indian Country by addressing barriers, fostering access to credit, and promoting cultural preservation. For instance, land preservation, a key focus for many Native CDFIs, directly supports cultural continuity and economic sovereignty. Native CDFIs’ holistic, client-centered approach ensures that economic empowerment aligns with the values and priorities of Native communities. According to interviewees, clients often report achieving financial empowerment, stability, and improved quality of life. The interviews also suggest that expanding Native CDFIs’ resources and partnerships could amplify their impact in fostering stronger, more resilient Native communities.