29 Apr Native Community Capital
Interview with Dave Castillo, CEO of Native Community Capital Fund
I met Dave Castillo at a Confluence Philanthropy Meeting in 2013 when he launched the Southwest Native Green Loan Fund with Confluence. Swift Foundation (where I worked from 2011-19) made an early decision to invest in a loan fund focused on Native Americans. Over the years, he has grown his work with Native Community Capital to serve more Native Americans with access to capital and financial services.
Jen: How was the Native Community Capital Fund created?
Dave: Our board and executive staff established Native Community Capital (NCC) in 2010 to advance tribal self-determination, by working as a lender and as an honest-broker for unlocking capital resources necessary to build tribal economies. Ideally, private sector capital shall be as readily accessible and in-use on tribal lands, for community and economic development, as in any non-Indian community. Our investments include affordable housing, public facilities (i.e. fire station, health clinic, etc.) and small businesses primarily in retail products and services or construction sectors.
Jen: How are your investment funds catalytic in a way that is different from other funds?
Dave: Our business and home loans stimulate the participation of other financial institutions and leverage federal guarantees to bring capital to geographies over-looked or avoided by conventional financial institutions.
Business Loans: Our BIA-guaranteed business loans must (per regulation) positively impact a tribal economy and shall only be made in the case where the lender would not otherwise make a loan (often due to lack of equity, collateral or credit history) if not for the guarantee. Our products are priced below market rates because conventional lenders and fintech add a risk premium if and when our clients get their consideration.
Home Loans: Because few if any other lenders will make construction loans for residential construction on tribal trust lands, NCC makes home construction loans on tribal trust lands and mitigates the risks through education and partnerships with tribal authorities. We then sell the loan to a conventional lender once a lien on a finished home (i.e. collateral) can be perfected.
Jen: How do you describe the kind of non-financial returns the fund offers?
Dave: We view return through a lens of reconciliation, restoration and repair. In our experience, many investors acknowledge that their wealth has been created through extractive practices that provide excessive rewards either to the owner of the capital or the owner of the business — but not the employees, vendors or customers and communities who help build that business. In order for all stakeholders to benefit, we look to work with investors who acknowledge that they are in a position of privilege, where they can afford to take less so that others who have been historically under-resourced can gain more. The non-financial return is progress towards a more just-economic landscape.
Jen: Can you describe how you use integrated capital to do your work?
Dave: NCC uses a blend of loan guarantees, credit repair entry-level loans, financial education, pro-bono accounting services, formal partnership agreements with tribal governments and other lending partners to mitigate the risks inherent in serving a population disproportionately characterized by distressed-income and credit profiles. Moreover, our financial model emphasizes production of the highest quality loan prospects in order to generate the revenue needed to underwrite the costs associated with lower quality loan prospects that nonetheless may represent future higher quality loan prospects either for us or our lending partners.
Jen: What is transformational about the businesses that you invest in?
Dave: The businesses, individuals, and tribes we work with, each play a vital role in the social and economic fabric that defines tribal communities. The transformational nature of our work involves strengthening, expanding and creating a design that reinforces traditional values or integrates new realities necessary for tribal communities to thrive on their own terms, and despite the harm inflicted since first-contact with colonizers.
Every new business and homeowner means the formation of new capital that benefits the entire community. The challenge we will face as we grow, is to avoid the influence of the dominant and inherently extractive capitalist structure on our operations. Our charge is to stay focused on honoring the traditional kinship, family, and clan relations that Native people continue to recognize, and with that the obligations we have to each other’s well-being ahead of our individual self-interests.
Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?
Dave: NCC’s mere existence and work to address the lack of access to credit, capital and financial services in tribal communities, is an effort to challenge the dominant transactional financial model, which demands that banks overlook or actively avoid serving tribes. We are leading the effort to achieve racial justice and affect income inequality in tribal communities with our products and services developed and delivered via active, consistent and meaningful engagement with tribal governments and individual tribal members.
We work with our clients in settings that are formal and informal, sometimes in community event settings, often in tribal courts where we negotiate how to best serve and adjudicate the needs of our shared constituents.
Jen: What does a foundation or investor need to understand in order to invest in transformational businesses?
Dave: Our “concessionary-based” return comes from level-setting the risk and return between borrowers and investors — based on need rather than “how things have always been done.” Addressing social and economic justice falls short when only structural barriers are affected. The structural barriers flow from the darker tendencies of our hearts and minds. Although we can hold competing truths in tension, we must own what is ours to do, to positively affect those darker tendencies within ourselves and our ingroups. Our work challenges the conventional notion that our communities are worth less consideration and investment, and provides a bridge to span the economic divide, so prevalent between Indian Country and the dominant economy.
Jen: What do you tell people who think your fund is risky?
Dave: We acknowledge that American Indian communities have historically been deemed “risky” based upon conventional metrics including income and credit profiles. Yet, in economically distressed communities, weak income and credit profiles are often an outcome of individuals sacrificing their relative comfort (i.e. financial resources) to benefit their immediate or extended family with lesser means. As such, their actions are rational and place community above self. Our risk assessment approach balances that reality with the degree to which businesses and individuals we invest in strengthen the community support network alongside our capital preservation goals.
|Investment thesis / What is your rationale for your approach to investing?||Native Community Capital utilizes federal guarantees, credit counseling, entry-level credit repair loans, and partnerships with tribal governments, Native-led business incubators as well as financing partners to support new capital formation in tribal communities across the Southwest United States.|
|Geography||Tribes,Native Entrepreneurs & Native Homebuyers, New Mexico, Arizona, California|
|# of Investments||34|
What’s on Dave’s Mind?
|Book||There Will be No Miracles Here: A Memoir and The Black Art of Escape 400 years have passed. Where do we go from here? both by Casey Gerald. Poignant, compelling, and brilliant.|
|Song||“Hurt” by Johnny Cash (original by Trent Reznor) reminds me how often we are unaware of the sincere and deep pain our fellow travelers hold in their hearts and minds.|
|Podcast / Film||Gather – a 2020 Documentary available at www.gather.film Always bet on the resilience of the human spirit. In this case, “…to reclaim…spiritual, political and cultural identities through food sovereignty, while battling the trauma of centuries of genocide”.|