Volume 8; No. 3; Summer 1996
Misconceptions Mask Opportunities in Indian Country
by Patrick Borunda, Executive Director, Oregon Native American Business
and Entrepreneurial Network (ONABEN)
Antedating the emergence of the Cascade Mountains, fed by tributaries
from British Columbia and western Montana and Wyoming, the ancient Columbia
River has been a constant factor in the Northwest's economic history.
Several thousand years before the political unification of Upper and Lower
Egypt in 3200 BC, Native Americans were sharing the bounty of the Columbia
as a common resource. Thousands of years before goods were carried through
Central Asia on the Silk Road, Native Americans used the river to create
a trade network, eventually linking Alaska to California and the Pacific
Ocean to the Dakotas.
Ivory, furs and fish, stone, hides and meat, shell, edible seeds and
medicinal treasures were traded at the mouth of the Columbia where the
Chinook Tribe maintained a busy exchange and traded on their own accounts.
Trade was conducted in a common tongue (Chinook Jargon) and employed a
regulated currency in the form of dentalium shell, the harvest of which
was restricted to prevent inflation. Denomination was by size of shells
grouped on a six-foot string.
This economic history is little known in today's banking community. Lack
of recognition contributes to the misconceptions and misunderstandings
that separate bankers from Native American markets and interferes with
the creation of mutually beneficial relationships.
There are at least four misconceptions about Native Americans which need
- Contemporary American society must rescue Native Americans from their
chronic condition of poverty;
- Reservation boundaries are irrelevant anachronisms;
- Reservation boundaries form a barrier to sound banking practices;
- The CRA is designed to benefit only underserved communities.
Let's examine each in more detail.
Contemporary American society must rescue Native Americans from
their chronic condition of poverty. A practical effect of this
misconception is that bankers often fail to treat Native Americans as
intelligent players in negotiating mutually beneficial agreements.
Actually, there have been distinctive, rich and complex social organizations
among Northwest tribes for millennia. Common features of these organizations
included sharing political power between men and women and gender-independent
accumulation of wealth and status. Cultural practices (e.g., potlatches
among coastal tribes) led to regular distribution of basic goods and wealth-leveling
within communities. The communities shared economic burdens and rewards.
This system was so effective that four months of labor were sufficient
to harvest the basics of survival for an entire year. This economic cycle
provided ample time for art, war, spiritual and cultural celebrations.
It was this cultural heritage that tribes intended to protect when they
agreed to treaties transferring property rights.
From European contact to the early 20th century, the Native American
population teetered on the edge of extinction. Today, despite two centuries
of unrelenting pressure, Native American communities are winning their
battle for self-determination and survival. Among the many historical
skills being restored and supplemented by contemporary education is that
of creating wealth. Not understanding the historical sophistication of
these communities burdens the business dialogue between Native Americans
and the financial community.
Reservation boundaries are irrelevant anachronisms.
A practical effect of this misconception is that the values that guide
Native American communities are not often considered when bankers evaluate
proposals and structure agreements.
In fact, the boundaries are there specifically to protect vital, functional
values with ancient roots. Native American communities have a unique position
and perspective in American society. These are "guaranteed"
by treaty rights which tribes constantly struggle to maintain against
continuing federal, state and local government encroachment. As this publication
goes to press, there are court actions from San Diego to Bellingham, Washington,
and from Portland to Denver involving attempts to limit tribal sovereignty
and cultural continuity.
Most Americans do not understand that sovereign Native governments were
not given rights or land by the treaties. Nor do most Americans understand
that the treaty obligations assumed by the United States are covenants
in perpetuity--they are not discretionary. Land rights were transferred,
value was delivered and treaties are still defined as contracts. In these
contracts, the sovereign tribes 1) reserved specific rights they already
owned in order to protect those rights, and 2) gave up certain rights
(e.g., ownership of territory) in exchange for specific promises and protections
for ways of life which predated the last Ice Age in North America.
In exchange for reservations on which tribes could live undisturbed,
Native Americans ceded large tracts of territory, opening them up for
white settlement. These reservations are remnants of ancestral homelands
where cultural values of consensus decision-making, inter-generational
respect, non-destructive use of resources, etc., hold ultimate authority.
When a tribal community seeks to invest in an enterprise, the community's
values must be used to evaluate the investment. If, for example, an investment
does not appear to generatea profit-margin consistent with conventional
lending practices, but employs a number of tribal members, it may very
well be a sound investment for the tribe. This does not imply that financial
expertise and advice should not be offered. It simply means that bankers
must recognize that their rules are not the only factors relevant in a
given situation and consideration should be given to employment of more
flexible practices. So long as a loan has an identified source of repayment,
other external guidelines of credit-worthiness ought not to be arbitrarily
Reservation boundaries form a barrier to sound banking practices.
A practical effect of this misconception is that bankers forgo
opportunities without exploring alternate means of satisfying restrictive
Historically, reservation economies have been driven by tribal government
and dominated by tribally-owned enterprises. Numerous assets considered
necessary for economic development (e.g., adequate physical infrastructure
and housing) have been absent. The need for various types of financing
When banks might have been players, however, they have often backed away
in the belief that a tribes sovereign immunity and/or the trust status
of land prevents adequate security. The key here is understanding (and
perhaps redefining) what is considered "adequate." Some remedies
are straightforward; others require imagination.
Sovereign immunity means that a sovereign entity may not be sued except
with its permission. The doctrine protects public assets, or, in the case
of a tribe, assets held in trust for tribal members. However, sovereign
immunity has been selectively waived by federal and state governments
and can also be selectively waived by tribes. For example, a tribe can
establish a subordinate or separate entity for purposes of a specific
transaction and may waive the subordinate entity's immunity without affecting
the sovereign status of the tribe.
To allay concerns about the trust status of land, the tribe may pledge
cash flow of an otherwise unrelated enterprise as repayment for a loan
to expand a business on trust land. If the loan is made to an individual,
the tribe may guarantee the mortgage by committing itself to buying out
a defaulting borrower. In either event, the bank's capital is protected
and the tribe is able to satisfy its community development purposes.
The Community Reinvestment Act is designed to benefit only underserved
communities. A practical effect of this misconception is that
bankers not directly associated with CRA activities may fail to understand
the profit potential of doing business in Indian Country. Business outreach
to all American citizens and to Native American tribes will pay dividends
to bank shareholders and benefit all the stakeholders in the "mainstream"
The stable economic base in Indian Country is more than gaming and extends
beyond the historically-identified natural resource businesses owned by
the tribes. A stable economic base includes a healthy private sector,
combining competitive capability with culturally consistent values. Contrary
to a widely held perception, the Internal Revenue Service does tax economic
activity on Indian reservations. Prior to the explosion in gaming revenues
and the now rapid growth of private enterprise, reservations were yielding
over $10 billion per year in revenue to the federal government. Reservations
are net contributors to federal, state and county governments.
Beyond gaming, Indian tribes throughout the United States continue to
hold title to significant natural resources--timber, minerals and energy
reserves. These include 44 million acres in range and grazing land, 5.3
million acres of commercial forest, 2.5 million acres in crops, 40% of
U.S. uranium reserves and 30% of western coal reserves. Though shamelessly
exploited by non-Indians throughout this century, these resources are
now being more aggressively managed by Native people. Many tribes have
achieved new levels of sophistication in the past decade and will not
release these resources to market in the absence of appropriate compensation
and safeguards. Banks which have good relationships with tribes will reap
the benefits of resulting trust deposits and future financing opportunities.
One of the most exciting developments in Indian Country today is the
emergence of a private sector which will raise community standards of
living and form the basis for wealth-creation through community capital
development. Native Americans now have the lowest per capita business
ownership rate of any community tracked by the U.S. Department of Commerce.
In the Pacific Northwest, Native Americans own fewer than 9 businesses
per thousand people versus 59 and 65 businesses per thousand among white
citizens of Washington and Oregon respectively. Organizations like the
Oregon Native American Business and Entrepreneurial Network (ONABEN) and
its offspring, the Native American Business Network (NABN) in Washington,
are making a systematic and aggressive assault on this statistic.
In just three years, ONABEN's program graduates have increased the number
of Native American-owned businesses in Oregon by approximately 35%. These
new business are adding approximately $7 million per year to the gross
state product of Oregon. With the assistance of regional banking partners
like Seafirst Bank, Key Bank of Washington, U. S. National Bank and others,
ONABEN and NABN are targeting approximately 250 healthy new business starts
in the next three years.
Privately owned Native American businesses currently contribute almost
$100 million per year to the northwest economy. Estimates indicate that
the Native American community could contribute over $1 billion by reaching
the average business ownership rates in these states. New employment measured
in thousands of jobs can be reliably forecast. In addition, added tax
revenues for state and local governments will significantly improve the
financial stability of struggling jurisdictions. Clearly, a case can be
made that ignoring the business opportunity in Indian Country is contrary
to the best interests of bank stockholders.
- Understand that Native American communities will succeed on the basis
of their historical identities and not as a function of becoming assimilated
in white America.
- Recognize that a successful relationship with a Native American community
begins with under-standing that individual community's aspirations.
Commit your expertise to helping them realize their aspirations. Creative
solutions will serve both the banks and the tribe's enduring interests.
- Pick a niche where you can make a genuine contribution. From government
finance to small business lending, the needs are significant in Indian
Country. Focus on a particular area rather than posturing as the all-purpose
- Finally, make a commitment for the long term. Pledge human and financial
resources to understanding your Native American customer base. Access
to capital alone is not sufficient to create a profitable relationship
with Native American communities.
Successful interaction between Indian Nations and the banking community
depends on each understanding their common interests while respecting
their profound differences.
Patrick Borunda is the Executive Director of Oregon Native American
Business and Entrepreneurial Network (ONABEN). Tarahumara-Mescalero (Apache),
Patrick earned his MBA at the Wharton School of Business at the University
of Pennsylvania. He has practiced as a professional consultant in strategic
management since 1978, serving clients in health care, higher education,
energy and financial services. For more information about ONABENs programs,
please call 1-800-854-8289.