Changing the way we lend money can help bridge the wealth gap in Native communities

May 3, 2022
Creative Matriarch Fund cohort at the Circle Of Support practice pitch and networking events at Native-owned Bow & Arrow Co. in Albuquerque, New Mexico. Photo Photo by Tytianna Harris.
Photo by Tytianna Harris.

Jaime Gloshay is a co-founder of Native Women Lead, an organization revolutionizing systems and inspiring innovation by investing in Native Women in business.

I've seen the wealth gap manifest itself in my lived and ancestral experience. I grew up on a Native American reservation, where I witnessed all of my family and community live in poverty. Both my parents worked for the US government, and even then we lived in poverty. My grandmother worked as a nurse at an Indian hospital—she was a single parent, my grandfather passed away young—and she lived in poverty.

I have felt intergenerational poverty acutely. It's a story of survival and resilience. 

I was told to go to college, get an education, get a job. That's your way out. And I did all of those things. I went to undergrad. I went to graduate school. But as the primary breadwinner raising three children, I struggled to survive. I went to work at a community development financial institution that had tens of millions of dollars in their pocket to lend, yet I was still making poverty wages. I was doing big leadership work and designing programs to get more dollars into the hands of underrepresented and overlooked entrepreneurs, making $16 an hour and living in a small apartment with my family of five. 

I did all the things you're supposed to do. But I still could not close my own racial wealth gap. It is very much not only lived experience, but an ancestral experience to know that—regardless of how much I tried and how much I worked—the odds and the system were stacked against me. 

This is all to say: I've lived it. I know—I can feel—what the wealth gap is. I see it every day. It's the impetus of why I do the work that I do now. It's why I was so excited to be one of the founding members of Native Women Lead, an organization that supports and invests in Native Women in business. 

I don't think the racial wealth gap can be fixed overnight, but I do think there are some things we can do to better support Native and Indigenous people. Here's how. 

Native people need assets to have access to capital. Start with housing.

This might sound outrageous, but this country needs to seriously consider reparations—and that  could start with access to housing. Similar to the Landback Movement, which returns Indigenous lands to Indigineous people, but a federal housing mandate for Indigenous people—or at least a subsidy. For example, in Albuquerque, where I live, 44% of the city's unhoused population are Native American.

The mechanisms aren't fully there, but I'd love to see a point where indigenous people actually do have a little bit of ownership—and that starts with housing. The reality is, Native Americans and tribes in this country do not actually own the land they live on; the land is held in trust by the federal government. So the federal government are stewards of Indigenous peoples' land. It sets up a kind of parent-child relationship. As a result of that, a lot of banks don't do business in Native communities, because the land is held in a trust, and they can't seize assets or collateral. If a tribe wanted to waive their sovereign immunity, they could do that. But that could also impact the power they do have. 

Because of this lack of ownership, the financial system and Native communities have really been a mess and Native citizens of those communities cannot access capital. Ensuring Native People have ownership over their land or homes is a first step in ensuring easier and more equitable access to capital.

Embrace relationship-based lending.

Before big financial institutions ruled the landscape, Americans went into their local bank or credit union where they had a pre-existing relationship with a bank. The bank was part of the community. Now, this obviously was not a fully rosy time: redlining and blockbusting were rampant. But trust and community were a big part of banking and lines of credit or access to traditional capital. 

I want to challenge the traditional five C's of credit—character, capital, conditions, capacity, and collateral—and that begins with relationship-based lending. The five C's of credit are exclusionary to not only Indigenous people, but many BIPOC and disinvested communities across the country. Relationship-based lending can help change that. We call it the Five R's of Rematriation:

Relational: Instead of Character, we are seeking to understand how the entrepreneur honors and values relationship, reciprocity, and resourcing.

Rooted: Instead of Capital, we are seeking to understand how entrepreneurs are invested in themselves and their communities.

Restorative: Instead of Market Conditions, we are trying to understand how entrepreneurs are creating better conditions for themselves, their employees, and their communities while building Indigenous businesses, economies, and markets.

Regenerative: Instead of Capacity, we are trying to understand how entrepreneurs build capacity for themselves while honoring people and planet.

Revolutionary: Instead of Collateral, we are trying to understand how entrepreneurs transform Indigenous economies and business.

My colleague Vanessa Roanhorse's Indigenous-owned firm Roanhorse Consulting worked on a pilot with Nusenda Credit Union that is continuing to test relationship-based lending. Initially, $1 million was raised through grant funding to prove that various communities—from Native families to immigrants—are investable and not risky. The early results were exactly what we thought: it works. To date, we are seeing less than a 1% default rate.

It's all about underwriting in a different, more inclusive way. Rather than relying on a FICO score, we want to look at the relationship with this person, their standing in the community, their own personal history, what they intend to do with the capital—instead of looking at someone's collateral or assets. We also want to make sure that they're rooted in community and they're trying to solve a problem. Relationship-based lending opens doors for everyone, from Native entrepreneurs looking for capital to working class Americans who may not be part of the mainstream economy and lack a FICO score to secure a loan. It's a community-based approach that helps improve individuals' lives, spur small business growth, and foster trust between the community and the financial institutions that serve it.

Loan forgiveness is a form of reparations. 

In lieu of full reparations from the federal government, financial institutions can help bridge the wealth gap by offering loan forgiveness. For example, at Native Women Lead we've built some level of loan forgiveness into the lending and giving model. If an entrepreneur is engaged in the community or, say, works with another organization to build skillsets at the community level—we give them opportunities for loan forgiveness. 

Currently, the loan forgiveness is a tiered incentive structure based on levels of engagement and resourcing: 10% forgiveness for attending four Native Women Lead events per year for the life of the loan; 10% for participating in the Circle of Support program with New Mexico Community Capital; 10% for consistently paying on time and more than monthly minimum as budget allows; 10% for engaging, participating, and utilizing two partner or entrepreneurial support organizations programming per year for the life of the loan; and 10% for leading, storytelling, speaking, or teaching at future Native Women Lead events. 

While this approach is emergent and iterative, Native Women Lead is trying to test and pilot to see what works best and meets the needs of the network. We are seeing this as an effective way to build community, create a positive feedback loop, and support small businesses that have traditionally been overlooked. It's amazing what happens when you simply trust, support, and give people money to self-determine their path to increase agency and economic empowerment.

About the Author
Jaime Gloshay

Jaime Gloshay is a co-founder of Native Women Lead, an organization revolutionizing systems and inspiring innovation by investing in Native Women in business.

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