Ka Wai Ola - Office of Hawaiian Affairs, Volume 13, Number 2, 1 February 1996 — Loan fund program enjoys successes, looks to the future [ARTICLE+ILLUSTRATION]

Loan fund program enjoys successes, looks to the future

bv Patrick Johnston

Seven and-a-half years ago, Continental Services, a small security service, received a medium-sized loan from the Native Hawaiian Revolving Loan Fund to upgrade its business providing

guards for government and private clients. The loan was the first of over 300 approved by the Native Hawaiian Revolving Loan Fund Board since the loan fund program was created. As of Dec. 31 1995, over $12 milhon has been used to help finance Hawaiianowned businesses. The loan fund has proven to be an effective way of providing needed capital for Hawaiian businesses that would not have been available using regular commereial lending institutions. A strict screening process helps strike a halanee between repayment of loans and making sure financing gets out to qualified Hawaiian firms. The loan fund received its inhial funding from the Administration for Native Americans (ANA) in 1989

as part ot the JNative Amencans Programs Act. In 1 992, the fund was reauthorized for three more years with matching funds from OHA. In September of last year, an additional $1 million was authorized by the ANA with a matching amount approved by OHA's hoard. Of the total

permanent eapiīal in the program, $7 million has eome from ANA and $4 million from OHA. Companies that have received loans run the gamut of small businesses operating in Hawai'i. They include restaurants, designers, chiropractors, retail outlets, agricultural ventures and auto body repair shops. Over 800 jobs have been created by the program's support of these operations. Originally based entirely in OHA's Honolulu office, large demand on the Big Island led to the placement of a loan officer at OHA's Hilo office.

Noel Fujimoto has been at the Hilo office since May 1995. The future of the loan fund With Congressional changes in Washington there has been eoneem that federal funding for the program will be scaled back or possibly eliminated. "Native Ameiiean programs are undergoing a lot of scmtiny in Congress right now," OHA eeonomie development officer Christine van Bergeijk points out. However, she adds optimistically that the loan fund does have the support of Hawai'i's Congressional delegation. "They recognize the importance of the program."

Because matching funds are required for trust funds to be used by all Hawaiians, the removal of federal funds would require OHA to find money else-

where in order to continue the program. One option being considered has been getting financing from private financial institutions. Federal legislation related to community reinvestment requires banks to invest some of their resources back into the

community. By investing in OHA's revolving loan fund banks could satisfy federal regulations but not jeopardize their own safety and soundness standards. "We've been looking for opportunities to leverage bank participation in the revolving loan

Other activities van Bergeijk envisions include having banks provide permanent capital and technical assistance to the loan program. She is also interested in exploring some kind of arrangement whereby OHA guarantees bank loans.

fund," van Bergeijk says, adding that there is a natural fit between the mission of the loan program and the CRA requirements of the banks.

Microloans

In May of 1994. the loan fund board approved a series of microloans tailored to graduates of a backyard aquaculture training program. The loan fund board approved 10 such loans totaling $20,000, helping to start up Hawaiian-run aquaculture projects on the Big Island, Moloka'i, and Maui. Microloans are normally loans under $15,000 and are used to help start up or improve small businesses owned by lowineome individuals. Microenterprise development programs are designed as poverty alleviation strategies whieh target self-employment. They have been gaining popularity across the country and have been getting attention in Hawai'i over the past few years. OHA's eeonomie development officer Chris van Bergeijk says she would like to develop more opportunities for microlending. "The key will be creating an effective partnership." Ideally this would be with a community-based group that would be closer to the borrowers and have a better understanding of community credit needs. "As a state agency we don't have the kind of grassroots presence that is important to make a program like this work."

Loan fund workshops

The eeonomie downturn of the past four years has been especially hard on businesses that have received loan fund assistance. High risk, often new eompanies, these businesses frequently don't have the means to carry them through slow eeonomie times. "In the last two years we have had to work hard to ensure the performance of our loan portfolio," van Bergeijk points out. In an attempt to provide companies with the technical skills to strengthen their enterprise, late last year OHA's eeonomie development division began a series of accounting workshops. The training sessions were designed to give recipients a better understanding of business concepts and standard bookkeeping practices. (See story page 5.) Future plans are to have similar workshops focusing on marketing.

lron workers, designers, chiropractors, loan fund recipients run the gamut of small businesses operating in the state. Photos by Patrick Johnston