July 27, 2015

Indian Start-Up Credit Unions Holding On

As published on Indian Country Today Media Network…

The experiences of the most recently chartered American Indian-based credit unions have been a mixed bag. Two are well-capitalized and seem to be performing normally, while a third was merged into another credit union only two years after it opened.

All of the recent entrants have been quite small. The biggest of the three, Lakota Federal Credit Union, Kyle, S.D., had $4.3 million in assets as of March 31, 2013 and served 2,014 members. It specializes in auto lending, with used car finance far outpacing new car loans.

The institution was classified by its regulator as well capitalized, with a net worth of $371,000 or about 8.6 percent of assets. Interest rates were 8.67 percent for new cars, 9.25 percent for used cars, and 12.18 percent for the riskier unsecured loans.

Lakota Federal was sponsored by another financial institution on the Pine Ridge Reservation. The Lakota Funds is a community development financial institution (CDFI) that started lending in 1986. Lakota Federal has also become a CDFI eligible for grants of up to copy million from the federal CDFI Fund.

Prior to certification, the maximum CDFI application amount was limited to copy50,000. Currently, the credit union has a pending application to the CDFI Fund for $750,000 which would help it boost its lending power.

Whitney O’Rourke, the credit union’s manager, said the credit union and the Lakota Funds do not duplicate each other’s efforts, despite both being CDFIs. The Lakota Funds does business lending on Pine Ridge, while the credit union has focused on car loans.

“We’re doing really well for starting out,” she told ICTMN. “Membership has grown faster than the 500 members the CU initially projected after three years. It offers secured (collateralized) loans up to $25,000 and unsecured (signature loans) up to $5,000.”

She said the credit union hopes to expand its unsecured lending limit to $50,000 and to add mortgage lending at some point in the future. It would also like to offer checking accounts in the future.

Lakota Federal has one branch and four employees, all members of the Lakota tribe.


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