Remarks from U.S. Treasurer Chief Lynn Malerba at the Financial Literacy & Education Commission (FLEC) Public Meeting on July 20, 2023

As prepared for delivery

Thank you FLEC Chair Nellie Liang, Vice Chair Rohit Chopra, and Deputy Assistant Secretary for Capital Access Suzanna Fritzberg for the welcome and many thanks to the other the FLEC members for your continued efforts to advance financial literacy across America – including Indian Country.

State of Financial Literacy in Indian Country

Today I share a few thoughts on the state of financial literacy and challenges with you. Consultations with Tribal leaders and conversations with Native youth during this past year have helped the Treasury Department affirmatively identify that health, education, public safety, environment, and business development are all interconnected. Investment in these areas in Indian Country promotes a cycle of social and economic prosperity and contributes to building equitable wealth.

Native Americans face higher poverty rates, overcrowding in homes, and inequitable health status including poorer social determinants of health, compared to other Americans. Native college students, already a minority in higher education, face barriers in financing higher education. One of those main barriers is financial literacy – the understanding of concepts like saving, investing and debt that leads to an overall sense of financial well-being.

As we know well, financial literacy is a lifelong tool, intended to give people the resources they need to achieve financial stability. This is especially true for Tribal communities, where financial literacy and access to reliable banking institutions can mean the difference between having an opportunity to have a comfortable and secure future or facing poverty. With the right resources, supporting financial literacy can help Tribal citizens build good credit, save for emergencies, go to college, and afford stable housing by owning or renting a home – all of which contribute to a stronger Tribal economy.

Lack of Access to Financial Institutions

As Tribal leaders have previously brought to our attention, the lack of access to capital and credit markets creates economic disparities in Native communities. This disconnect from mainstream financial institutions creates a barrier to financial literacy, conventional financing, and economic stability. Some banks are hesitant to both locate and lend on reservations due to a lack of knowledge in navigating sovereign immunity, tribal jurisdiction, and the status of land held in trust.

Complicating this is the fact that the average distance from a reservation to the nearest bank is 12 miles. That’s more than three times as far as the national average, which is under four miles. Individuals who grow up in “financial deserts” are 20-percent less likely to have a credit report, have a 10-point lower credit score, and have a higher delinquency rate.

Additionally, many Tribal communities have limited access to reliable high-speed internet that can also hinder banking for Native people. The remote nature of these areas combined with challenging terrains and lower incomes disincentivizes broadband deployment and increases associated costs.

We know that having a relationship with a local bank is essential to building a credit score, long-term economic growth, and financial security. In places where conventional banks have largely ignored Tribal communities, Native American banks, credit unions, and community development financial institutions (CDFIs) have stepped in to fill the gap in both banking services and financial education. These institutions are paving a path for economic prosperity for Native communities.

Buying Power

Lastly, Indian Country is not a remnant of the past. Not only is it a large contributor to the economy, but it is also growing at five times the total number of all U.S. business growth. Although Native Americans comprise of just 1.7-percent of the U.S. population, Native people have tremendous buying power – around $115 billion prior to the pandemic.

While these are tremendous statistics, Native business owners report a greater reliance on credit cards – a type of informal financing due to the lack of access to capital. And many small business owners do not truly understand their financials – a key to making sound business decisions and a way to gauge profitability.

With that being said, we fully expect additional increases in Native business growth over the next decade given the infusion of capital by the American Rescue Plan’s State Small Business Credit Initiative or SSBCI, which provides a $500 million set aside for Tribal governments to enable investments in Tribal enterprises and small businesses. Additionally, small business opportunities in the Inflation Reduction Act and other initiatives included in President Biden’s Investing in America agenda will create new opportunities for growth.
With the influx of all these impactful programs, we must do our part to position business owners and their employees for success. The key to success will be to address them together as FLEC members.

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