Ka Wai Ola - Office of Hawaiian Affairs, Volume 13, Number 3, 1 March 1996 — OHA eeonomie division impacts bottom line [ARTICLE+ILLUSTRATION]

OHA eeonomie division impacts bottom line

Seeding new Hawaiian business and jobs

More than 250 Hawaiianowned businesses probably wouldn't exist without it. Nor would over 800 jobs. In these or any other bottom-line eeonomie terms, including the state taxes it pays, OHA's Native Hawaiian Revolving Loan Fund (NHLRF) has been an unqualified success. So has its sister program, communitybased eeonomie development (CBED). The loan fund benefits individual Hawaiians; CBED is for whoie eommunities. Both are administered by OHA's eeonomie development division, one of the Hawaiian agency's five main areas of operation. The division aims to create a range of eeonomie opportunity that speaks to different interests in the Hawaiian eommunity — from individual entrepreneurs to more collaborative and culturally sensitise community groups. This is ihe first offi\ e articles dealing with OHA' s principal activities and their importance to Hawaiians. The remaining articles in the series will appear in subsequent issues of Ka Wai Oia O OHA.

The NHRLF NHRLF got its start in 1 989, as a result of a three-year commitment beginning that year from the federal Administration of Native Americans (ANA). ANA, funded by Congress, agreed to put up $1 million a year for a loan fund to aid Hawaiianowned businesses. The program was re- • -\ī- --- :

authorized in 1992, at whieh time OHA decided to match the federal funding dollar for dollar. From then on the loan fund grew at the rate of $2 million a year. Loans from the NHRLF ean be made only to Hawaiian-owned businesses. The majority of these are start-up businesses that could not get financial help elsewhere. In fact, a requirement for NHRLF funding is a turndown on loan requests from at least two commercial banks.

"The reason for that is that we want to help those Hawaiian businesses that need help the most," says Christine van Bergeijk. eeonomie development division officer. "We decide eaeh loan applieation on a case-by-case basis, but viability is the major consideration. If you ean borTow money from a bank, thēre is probably somebody else who needs our help more." Annual funding from ANA and OHA has broughl the total amounl in the loan fund to $12 million. Of that, $7 million has eome from the ANA and $5 million has eome from OHA. Almost all of the total is currently loaned out to qualifying business- j es. In fact, 255 loans have i been made since the 1989 start of the program. Chris van Bergeijk and staff have

calculated that NHRLF loans have created businesses that now employ some 818 workers. "We keep in pretty close touch with our participants," says van Bergeijk. "We want to help them any way we ean." Most NHRLF loans run between $15,000 and $75,000, are for five-year durations, and are designed to help get a deserving business started. But lately the continued page 10

View from site of future Hāna CBED project: creating a range of eeonomie opportunity.

Eeonomie development from 1

OHA division has branched out its loan program and other services. It's now trying to reach even individual entrepreneurs- — "the lower end of the loan spectrum," says van Bergeijk. "Most of our loans are over $15,000," she says. "Now we want to do smaller loans as well." And, importantly from the standpoint of expanding participation, the division wants to do joint loans with banks. That could cause the whole loan program to blossom. A major reason that most loan apphcants can't get bank financing now is that they don't have the minimum two-year

operating records most commercial lenders require to make business loans. "The big hangup usually isn't being unable to make the monthly loan payments," says van Bergeijk.

"By enabling the creation anel expansion of businesses and other eeonomie activities where they didn't and couldn't exist before, these programs help Hawaiians help themselves," - Trustee Moanike'ala Akaka

"The problem for most of our apphcants isn't so mueh the cost of capital, but access to capital." The NHRLF is hed to the rules goveming its federal ANA funds in its loan terms. Interest paid by borrowers, for

example, is pegged at 2 percentage points below the current 6-month Treasury Bill rate. That's currently 5.5 percent, whieh puts the NHRLF rate at 3.5 percent. It's a bargain rate in any loan market. but so low OHA has been unable to get loeal banks to participate in making loans. Their participahon could also take the form of NHRLF guarantees of smah business loans made by banks. And the division is expanding in other ways. Recently started is an educational program aimed at teaching loan participants to better manage their businesses. "It's a sort of introductory accounring and bookkeeping class," says van Bergeijk. The class runs for three sessions on eaeh major island and is taught by the eeonomie development division staff. Completion is required of new loan participants before their funds are disbursed. The courses are £ree to those who qualify.

"This program helps them do their own fīnancial statements," says Bergeijk. "It's been very well received. I've had people tell me it's the most useM course they've ever taken. That now for the fīrst time they really understand their business." There is powerful incenrive to expand the NHRLF. It currently ean only begin to meet the demand for its assistance. Compared to the $12 million in loans it has been able to make, there have been applications for $88 million in loans — more than seven times the amount it was able tolend. CBED Community-based eeonomie development is strictly a state program, matching OHA funding with money from the Legislature. Currently annual funding runs at $250,000 —

half from OHA and half from the state general fund. No federal money is involved. CBED helps fund a number of eeonomie projects benefiting Hawaiians, including the Hāna Village Marketplace — a commercial market plaee for many Hawaiian-owned businesses in Hāna, Maui — the Hui 'Ulu Mea Ai, a taro demonstration project in 0'ahu's Waiāhole Valley; Huliau O Ka'ū, a Hawaiian agricultural training center in the Big Island's Ka'ū district; and Haola, a community center for the Pana'ewa Hawaiian Home Lands development. There are many more CBED projects reaching out into most parts of the statewide Hawaiian community. To assist Hawaiian community organizations in developing eeonomie projects, OHA co-sponsors an 8-month training program whieh is housed at Chaminade University. This year, 13 Hawaiian organizations (26 individuals) from

across the state are participating in this training program. "These two programs — NHRLF and CBED — are among the most effective of all OHA programs iil helping Hawaiians where they need it most," says Trustee Moanike'ala Akaka, who chairs OHA's planning, eeonomie development and housing committee. "By enabling the creation and expansion of businesses and other eeonomie activities where they didn't and couldn't exist before, these programs help Hawaiians help themselves," says Trustee Akaka. "And through the jobs they create, the families they feed, the products they make and distribute, the industries and communities they benefit, these enterprises multiply the money invested in them many times over. It may be the best eeonomie investment anywhere in the state."