Leech Lake Financial Services takes on predatory lending with nation-leading innovations that boost credit scores, lower defaults and build community wealth
Blandin Foundation grants help the Native CDFI expand local financial services to rural residents and support community development
GRAND RAPIDS, Minn. (June 8, 2023) – Two grants Blandin Foundation recently awarded to Leech Lake Financial Services (LLFS) to build local assets are positively impacting the community.
Based in Cass Lake, Minn., LLFS provides a suite of financial tools ranging from car and business loans to training on personal finance, home buying and building credit. As a US Treasury-certified Community Development Financial Institution (CDFI), LLFS is a nonprofit, bank-like institution that can access state, federal and philanthropic funds to serve community needs.
“We provide products and training grounded in Anishinaabe values,” said LLFS executive director Rob Aitken. “We provide a safe space for our community to share their deepest financial concerns and ask questions in private.”
Since its launch in 2013, LLFS has made more than 2,100 loans totaling more than $5 million and provided financial literacy and other training to more than 800 residents. With a default ratio near zero (0.016 percent), LLFS Credit Builder loans outperform the national default average (1.22 percent) by a factor of 76 and stand in stark contrast to average loan default rates among low-income borrowers, which are often double the national average.
Adding to the toolbox
A $250,000 grant award is helping LLFS add staff and expand the types of financial products it offers, support the Credit Builder loan program, raise the Leech Lake community’s profile in real estate services, build a small-business incubator and strengthen the reservation’s smallest communities.
Such tools are sorely needed because current financial systems and federal policies have created significant disparities for Native Americans. Leech Lake reservation residents face 32 percent lower per-capita income, 50 percent higher poverty and mortgage denial rates five times higher than other Itasca area residents. More than 90 percent of Leech Lake’s on-reservation members can’t access financial products through mainstream institutions.
“LLFS’ expertise and innovation are transforming them from a financial services provider to a national leader in community development,” said Kyle Erickson, Blandin Foundation’s grants officer for community wealth-building. “More staff, expanded offerings and flexible resources to meet community-identified needs means Leech Lake Financial Services can build successful systems on its own terms, by and for its own people. This enables them to maximize benefit for individuals, households and the entire community.”
To reach that vision, LLFS has developed flexible and innovative lending programs – including allowing people to use paid time off (PTO) as loan collateral for its Credit Builder program. Aitken first developed the PTO collateral model in 2012 for the Leech Lake Band of Ojibwe staff as a tribal government program, which was so successful it led to the launch of LLFS and the offering was expanded to other organizations throughout the community. He encourages other financial institutions to establish similar structures, noting it can work with any employer that provides a cash-out of earned vacation and has a payroll department willing to participate. Unlike other employee lending instruments like payroll advance, this scalable system gives borrowers the opportunity to build credit and gives employers a valuable new benefit for their workforce.
Innovation and agility like this position LLFS on the leading edge of the nation’s CDFIs. According to a recent Aspen Institute report on rural community development, less than two percent of the nation’s 1,100 CDFIs deploy financial solutions beyond term loans.
Unleashing the power of flexible funding
As a CDFI, LLFS also has a keen eye on the area’s community development needs. With a $100,000 Blandin Foundation grant, LLFS is creating and implementing a five-year community development plan in Ball Club and providing development capital to move critical local projects forward.
Ball Club is small, just 153 people, with persistently high poverty. Updating the local community center is a key priority among residents who seek a location for reliable, affordable internet and a refurbished gathering space for events.
LLFS staff understand Ball Club’s barriers and how available funding will spark creativity and resourcefulness in the community planning process. It’s just the type of community-wealth building that energizes Aitken and his staff.
“Success here is to stop the generational, systemic poverty affecting this community,” said Aitken. “For the economically disadvantaged, asset-building is key. Where there is asset-building, there is lower crime, higher graduation rates, less chemical dependency and a healthier community.”