Douglas Bystry  0:00  
You know, traditional banking traditional borrowing on an Indian reservation is almost non existent. As a CDFI, we have seen that we feel like as a CDFI, it's our job to sort of run to the problem and try to make a difference. And so, you know, we've worked very hard to try to provide credit to make loans on Indian reservations for very important community development or other infrastructure projects.

kevin edwards  0:25  
You are listening to the real leaders podcast where today impacts tomorrow. We run toward problems and leaders keep it real. That was Doug Bystry, the founder, President and CEO of Clearing House CDFI, who shares with you the challenges disadvantaged communities face with receiving loans, the most difficult decision he's ever had to make, and the importance of following your conviction. So people, let's give it up for the real Doug this tree. Enjoy. than that, we'll get started here. Spring, the energy today, these podcasts, you know, they go along and we want to make sure we're giving people a quality interview today. So we'll get started here in 5432 and one and welcome, everyone, to this episode of the real leaders podcast. I'm your host, Kevin Edwards. Joining me today is Doug mystery, the founder, President and CEO of clearing house community development financial institutions. Doug, thanks for being with us today. 

Douglas Bystry  1:31  
My pleasure.

kevin edwards  1:32  
So Doug, not only are you a great man, but your organization ranked on our Real Leaders 2020 100 Top Impact Companies. So the people want to know what is Clearinghouse CDFI and how does it generate impact?

Douglas Bystry  1:52  
Well, first off, I want to say how excited and humbled and proud we are to be listed among those group of businesses. That's really amazing. So thank you for that. Current. Now CDFI is, as our name indicates a community development, financial institution, which really means that we're a lot like a bank, except that the only loans we make are those that have some sort of tangible community benefit. That can be varied and vast. It can be everything from job creation, affordable housing, it can be helping a nonprofit group. But everything we make a loan on is designed to make the world a better place. And so CDFIs are throughout the country. There's over 1000 of them. It's a designation that we receive through the US Department of Treasury, but it's really all about making loans providing credit in areas that are both good for the world and will bring about positive change.

kevin edwards  3:03  
So Doug, you're the founder of clearing house, what were some of your career experiences before clearing house and what made you really make this change to say, Hey, we want to provide loans to the people that transform these marginal communities.

Douglas Bystry  3:20  
What was really interesting is I was running a nonprofit organization that was brokering loans to banks. And the idea then was to try to get banks to step up and make these impactful loans in the community and try to get them to share in the risk. I tried that for three or four years. And the reality is, is that it was terribly unsuccessful, couldn't get the banks to step up. I found that, you know, our loans were at the bottom of the pile, so to speak. And I decided that if we were ever going to be a lender that was impactful, it was going to make a difference. We had to raise our own money. Make our own credit decisions. So in the mid 90s, I decided to start clearing out CDF fi. And we started by raising a million dollars of equity capital and $10 million in loan funds. And we just started making loans,

kevin edwards  4:15  
started making loans. And those loans really go a long way. Now, I just want to take it back a step. You were having trouble getting these nonprofits loans to start and have these impact in these communities? Is this because of the model is this because of maybe some stereotyping along the way? some cognitive bias what to you were some of the the blocks or the things in the way the barriers in the way that we're stopping these committees from receiving these loans?

Douglas Bystry  4:44  
Yeah. Well, Kevin, I think you're you're onto something there. There. There's a law in this country called the Community Reinvestment Act. And a lot of people know it is CRA, and it's designed to prevent banks from redlining. or excluding low income or communities of color, where they make their loans that is, in fact against the law. And the Community Reinvestment Act combats that. And so we often banks get involved or want to work with a company like ours to help them comply with the Community Reinvestment Act. But what we found is exactly what you said is that if we would submit a loan to a bank, and say to them, you know, this is a CRA loan, automatically, the underwriters considered that as a greater risk alone, that they're likely to lose money on or, you know, something that is somehow flawed. And I think, you know, I came to the realization that it was that stigma that actually prevented these loans from being funded. And if if somebody or something and we feel like our company is that company that did that. would look beyond sort of the stigma of, Oh, this is a loan benefiting really low income people, but really looked at the credit and looked at the metrics and said, No, this is a good loan, it's also going to do wonderful things. But this is a good credit risk. And I think that's really what distinguishes us or differentiates us from a conventional lender.

kevin edwards  6:21  
So the risk is a big factor for an insurance broker, or as just insurance agents in general, or any type of loan. What are your success rates? I mean, are you are you seeing that these communities, these people are paying back all their loans, and they're able to make those up and earn a return on all these?

Douglas Bystry  6:45  
Well, I'm going to be the first to say that, you know, as any lender, we've had some borrowers that, you know, have not performed and not been able to pay us back. But what I'm delighted to tell you is that historically, and this goes over, you know, 22 year history now Our total loss rate is less than 1%. Now, what's ironic about that is that is much better or lower than most conventional banks who are not doing these quote unquote riskier Community Development loans, the type of loans that they would perceive as more risky. We found that, in fact, our borrowers do pay us back in

kevin edwards  7:22  
general, are you finding that your employees in in clearing house are coming to clearing house because they want to have an impact in these communities?

Douglas Bystry  7:33  
Yeah, you know, it's interesting, in a tight employment market, which we're in sometimes it is really hard to find, you know, great people. One of the distinct advantages we have is we're able to say to people that what you do every day is going to make a difference in the world and it's going to result in positive changes. You may be helping low income people you may be helping a small business, stay in business or expand, you may be helping a nonprofit, a Boys and Girls Club, get a new gymnasium, or something like that, that, you know, particularly younger people can really appreciate. We're finding that you know, the value at workplace is often about salary, what they're getting paid per hour. But that intangible that you referenced is extremely important. And we do have a number of our employees who just talk about that. And what's really funny is some of the people that are in the trenches, so to speak, and lending they're doing, you know, underwriting or loan servicing, and, you know, they're not as connected to our borrowers. And then, at our annual shareholder meeting, we feature two or three of our borrowers on some sort of video presentation, and they'll come up to me and they'll say, that is just amazing. I'm so proud that I work here and it's so great to see what we're doing with our loans. So sometimes it's a little bit Have a delay. But you're right, it makes a big difference. And we're seeing that across the board. And we're also seeing it in terms of retaining employees as well.

kevin edwards  9:07  
Yeah, that's great. Because sometimes it's difficult to realize and understand and visualize your impact that you're having in your day to day operations. So I think that's really interesting. Now, when you set out when you started this organization, you said you came for the nonprofit's they're struggling with getting these loans from these banks, and you wanted to transform these lives in these local communities. Now, has your core values of the of this company changed since you've grown? And what are some of the challenges that you've faced along the way while this company has been growing, in terms of your alignment and vision?

Douglas Bystry  9:49  
Wow, that's a really good question and one I probably haven't thought a lot about, but I'd like to say that the core values we had when I started this company are pretty close to what I consider to be the core values of our company. Our corporate culture is extremely important to me. And I spend a lot of time thinking about it, talking to our employees about it, and trying to reinforce it. And I think as a start up business, yourself so focused on surviving, and, you know, you know, making sure that you don't go out of business that sometimes you probably don't think as much about the core values and the things that make you great. We've been fortunate, we've worked hard, and we've achieved success. And so I think we're at a place now where I can spend a little bit more time talking about our corporate culture, our core values as a company, and and what makes us tick and why we're different, why we're, I would say a successful CDFIs versus maybe some others that have struggled more than us.

kevin edwards  10:59  
So Why you're different now? What about the loans that you're giving? For instance? How do you determine what a who you can give a loan to? I mean, are there some organizations that you can't give a loan to because of their social or environmental impact? Explain to our audience how this works?

Douglas Bystry  11:20  
Yeah, that's a great question. And so as a CDF fi, our mission is to provide credit in areas that credit traditionally, is lacking. So for low income communities, distressed communities, populations that traditionally have had a hard time accessing credit in a capitalist society. So that by definition is, you know, what we are and who we do. There's a percentage of loans that we can do that, maybe our little bit outside of that, but what to answer your question directly is that we We try to see on every single loan we do, you know, what is the community benefit. And sometimes it's really just helping a small business. But we have had to turn down loans. So for example, if somebody came to us and said, Gosh, you know, Doug, we have this raw land, and it's overlooking the beach in Dana Point or La Jolla, and we're going to build, you know, five spec houses and sell them, they're going to be, you know, beautiful homes, and we absolutely are going to make a ton of money and all we need from you guys is a construction loan, we would probably tell that borrower Gee, you know, we're not the loan to help you out. However, if you were going to put a community center there or charter school or something that would benefit low and moderate income communities or populations, or maybe even a factory where you're going to have a lot of jobs. Those are the types of criteria that we have to look at and we have to make sort of a yes or no determination from an impact standpoint. And then of course, the other thing is that obviously Every loan we make, we have to feel like is a good credit risk that the borrower is going to be able to pay us back. And that, you know, they're not going to take our loan money and then falter with it.

kevin edwards  13:10  
A lot of our audience, I'm sure people in general have some hysteria towards the housing market and just loans in general subprime loans, things like that. That example, you just gave a very difficult decision that turned down, you know, a lot of money in this case, what's the most difficult decision you've ever had to make?

Douglas Bystry  13:32  
Well, I think the most difficult decision I've ever had to make is on the other end of the spectrum, where we have a borrower and in this particular instance, it was a small business on Indian reservation, trying to take their business to another level. And they had achieved some success and actually had orders exceeding their ability to meet the demand for them. But You know, as with any small business on an Indian reservation, you know, lots and lots of, you know, problems and obstacles for them to overcome. And the hard decision there was not from an impact standpoint, I knew if we made this loan, it was going to really help them. The difficult decision for me in that particular instance was, you know, are we going to be able to get paid back on this loan is the risk outside of the standards we're willing to accept. And on this particular loan, I'm really glad we did it. We helped a business stay alive and grow. They're still in business today. They're still struggling. The name of the business is Native American natural foods. So any of the listeners want to support an unbelievable organization, small business that is on the Pine Ridge Indian Reservation, that would be great. But it is those type of decisions that I think I struggle with the most

kevin edwards  14:58  
Indian reservations. are difficult A lot of people don't understand kind of why they are the way they are, how they got to that, that place and what America's involvement was, in these communities, the separation and kind of their jurisdiction, I guess. Could you explain your audience like your background? And like, I guess your knowledge of these Indian Indian reservations and what some misconceptions are?

Douglas Bystry  15:25  
Well, first off, you know, the, the biggest difficulty is that, you know, we live and operate in a capitalist society. And obtaining credit is extremely important. And I don't know about you or many of your listeners, but almost everyone in my life, including myself, has had to rely on banks to help me get, you know, a home, a car, and it's all been about the bank basically, lending the money and taking a lien on property. Well, the way this country set up the reservation system That Native Americans cannot, in fact, pledge that land to a bank. So you have this system in our country, where, you know, banks provide credit and they secure the credit via land. And you have, you know, traditional banking, traditional borrowing on an Indian reservation is is almost non existent. As a CDFI, we have seen that we feel like as a CDFI, it's our job to sort of run to the problem and try to make a difference. And so, you know, we've worked very hard to try to provide credit to to make loans on Indian reservations were very important community development or other infrastructure projects. But that's just the biggest inherent problem. I think some of the misconception is that, you know, the tribes either have lots of lots of money because they're, they have gaming. There are some, you know, wealthy tribes that that have been able to use gaming to to sort of Change the dynamics of their existence. But the other one is that, you know, you just can't do business in Indian country, and that, that it's just too hard or that, you know, you can be down the road and the rug can be pulled out from under you. And so those are some of the misconceptions we've seen. And I'm not going to say it's easy. But I think it's worthwhile, and it's one of the things I'm the most proud of as a CDI that we do.

kevin edwards  17:27  
Well, it's it is a common theme with a lot of the impact companies is that they see these problems as business opportunities. Would you agree with that statement? And would you maybe illustrate to our audience a story? People love stories? Doug, would you would you illustrate to our audience a story of a problem that became an opportunity and now it's transforming some lives?

Douglas Bystry  17:51  
Yeah. Well, I'm, you know, I sort of mentioned Native American natural foods, and I We'll come back to that first and I'll tell you another True story. The problem with Native American natural foods is they created a health food bar made out of buffalo meat and cranberries. They used an ancient tradition that their ancestors sent us because cranberries are a natural preservative and that was what they use to keep the meat fresh before there was refrigeration. So they created this meat bar called the Tonka bar. And it took off and it did great. And it went really, really well. And they were in Whole Foods and they were in Rei. And, and they were growing beyond imagination. And unfortunately, I better not say who the companies were, but two prominent companies, all of your listeners would know, created two copycat bars. These are big food companies, and they essentially have stolen the market from sad as it can be. It's reality. And everyone knows that business is difficult. And it's really hard in the food business. But when something like that happens, it really makes you take a step back and wonder and go, Oh my gosh, you know, with all the obstacles, and here's a group that began to have success, only to have two prominent food companies come in and, and basically, kind of copy the idea and take it away from them. So that's a not so great. That company is still in business today. They're working through the internet, and we're helping to help them, revive them and get them back and bring them to prominence. But the other story I want to tell you about is a time that I was on the Navajo reservation with one of our Native American advisory board members who happen to live there, and I'm driving in the car and we're driving through what would look like a low income neighborhood. And a lot of the houses had a front porch, and I would see on a lot of these front porches, sort of a big wooden barrel kind of you know, that you normally would see, like wine store dip. And, you know, sort of casually said to the people that were driving me around, I said, Why does everyone have a big, you know, wooden barrel in their front yard? Or in their on their porch? And the answer was, well, that's where they store their water. And I was like, What do you mean? And they said, Well, these these people, there's no running water. So they have they have, you know, faucets and sinks and they have showers, but there's no running water. And it was just, you know, mind boggling to me that that in this day and age, in our modern era with everything that we have, that there are still people living in reservations that don't have running water, but that is in fact true. We may alone on the Navajo Nation, using new markets tax credits, to create a wastewater treatment plant, which was going to allow them to complete the process of bringing running water into these homes and I And I'm happy to say that today, in part because of our effort, many of those homes now have running water and they can take showers, and they can do the things that we all take for granted. But that just gives you an indication of some of the load that people particularly low income people living on reservations are facing today.

kevin edwards  21:18  
That's incredible. I mean, I had no idea and just to go back to kind of how it all started, you know, here we are, the western frontier, we think the best way is to have a federal banking system and, you know, they didn't agree with it. And it's just a it's a bloody history. It's a It's a crazy background, you know, I don't know all about it, but from what I've read and heard, it's, it's pretty, pretty dramatic and drastic, but you know, it's going to take a lot of leadership to bring these communities back to you know, the the first world and I guess, you know, someone told me, Doug, this is a leadership podcast. So what do you think? What type of leadership Do you think is needed in order to help out these marginal communities within our own borders?

Douglas Bystry  22:08  
Oh, well. One of the things that's occurring right now is that I mentioned Community Reinvestment Act, the law that requires banks to reinvest in the areas where they're doing business. There is a reform going on right now. And I think leadership would be to support the reform, because that reform will give banks credit for investing in areas that they call CRA deserts, or areas where there are no bank branches. So right now, the way that law works is that you know, if a bank has a branch in that area, they need to do things that will benefit people of all income levels around that branch. But you have gigantic swaths of this country that have no bank branches. And it's not just Indian reservations, although that that is very common for reservations not to have a bank branch but other areas, low income areas, the Central Valley Appalachia areas where there just isn't a lot of banking. And so the reform now that is occurring, will give banks credit for investing in those CRA deserts. And so that's something right now that I think people could get behind and support. It's the Comptroller of the currencies office that is providing that sort of regulatory change that they're working on right now. I think beyond that is just if people are thinking about business opportunities, or where they can locate or what they can do is to not just exclude reservations as an area that they would consider, particularly if it's a you know, warehouse or storage, cold storage, you know, something of that nature. The other thing that we're working on right now is trying to restore the buffalo in Indian country, there are a number of efforts underway. There is the Tonka Fund, which is restoring buffalo so that Native American populations can get back in the business of raising buffalo. It is one of the healthiest meats out there, which I think fits in well with people's health concerns right now. And so, you know, those are some some examples of leadership and what people can do. And in by supporting those things, even if it's just a monetary, financial donation, that would be extremely important.

kevin edwards  24:37  
Well said, Doug. And that's just one chime on that really quick the buffalo apparently back in the day, they used this they just used to be everywhere. Like, I think there was a story is like, yeah, like people just be on trains. They lean out the train, just shoot a buffalo that was just right there. It was just normal. And then since you know fur trade came in and the whole western frontier. They've Just decimated these beautiful, large animals. So to have that back would be great. And to do that, you know, would that be a for profit solution or nonprofit solution? And that's going to allude to my transition to my next question is the leadership that is needed the acts of society that are needed to sustain these populations to sustain these animals? What is the nonprofit's role? You mentioned? You were in nonprofits earlier? And what is the for profit industries role? Yeah, well, it's a really good question.

Douglas Bystry  25:32  
And I think I don't know if I mentioned it before, but you know, we are a for profit CDFI. And that was something that we incorporated that way from the beginning. And I, I always tell people, the big difference between us and nonprofit CDFIs is we pay taxes. Otherwise, we're exactly the same from a mission standpoint. But I think, I think particularly as it relates to restoring the buffalo as I mentioned, there is a strong nonprofit effort being undertaken. Right now in terms of doing that, and the Tanka Fund is a great example of, but in what they're doing is purchasing land, my understanding costs like, you know, $380,000 and with that you can, you know, begin to, to build up the buffalo population, but on a on a for profit, and I think it sort of goes back to what I was talking about before, which is to think of these areas as potential places where you can do business. Indian country has some advantages from a business perspective. And I think as it relates to, you know, the average consumer if you, you know, think about if you're out to have, you know, you're going to go to Outback Steakhouse and you decide, you know, gee, I'll try the Buffalo. You know, getting consumers more comfortable with eating buffalo rather than having a steak or ribs or fish or something like that. would be a small way that people could, could help out. But I think it really boils down to looking at Indian country in a way that says, you know, is there something that I can do there, be it from a business level or an individual level and not just writing it off and not just forgetting about it and not thinking about it, which I think all too often happens in our in our country.

kevin edwards  27:25  
Doug, the reason I like social entrepreneurs so much are because not only is it difficult to start a company, it's difficult to start a company and not always, like you said, go for something that's going to make the most money. It's difficult to always have that integrity and stick to those values and stick to the mission of the company. What has been the thing that has kept you so focused on this journey? And like on a personal note, like, what are some challenges that you've had to deal with and how have you been able to get through them?

Douglas Bystry  27:58  
Yeah, um, I think For me personally, I've always been a person that has had a lot of drive. And the term I use is grit. And I think grit is something that that internally, you tell yourself, you know, I'm going to make this work no matter what. And when people say, you know, you're nuts, you're crazy. You know, Doug, you can't possibly make loans to nonprofits and be profitable. You know, you have to hear that and say, Now, I'm going to prove you wrong. So that's, that's one thing. I'm also a person of faith and I have a spiritual part of me that makes me realize that what I'm doing here is a much smaller part of the giant universe and in with the gifts that I've been given, the most important thing I can do is share them And fortunately, I've been given some wonderful gifts and Some gifts of, you know, foresight, the ability to to take this lending organization and take it to the next level and help a lot of people with it. And so I derive a great deal of pleasure from that. And, you know, that's a real personal thing that doesn't work for everybody. But for me, there's always been a deeper purpose of what I'm doing and the work that I'm performing, will set Doug in great

kevin edwards  29:28  
faith. Yeah. Some qualities of leadership, you're attracting these people you mentioned before they're coming to the space who want to be a part of this mission. So to bring this full circle, I want to ask you, What is your definition of a real leader?

Douglas Bystry  29:46  
Wow. Well, you know, I knew you were going to get around to that. And, you know, I thought that there's it's hard to sort of put into sort of a short sentence. You know, you know, there are a lot of different traits and I think a real leader has to have, I think a real Leader, you know, has to listen. First and foremost, and, and being able to listen and to hear people and to understand where they're coming from, I think is probably one important characteristic. The other thing is, is and I think about this as it relates to our business is being able to empower people that work for you, and allow them to sort of go and do things. You know, I, my management style is consensus. It's not at all dictatorial, or, you know, you have to do this because this is the way we do it. So I try to empower my employees, I try to let them do their job. And I try to interfere as least as possible. And I think a real leader can be comfortable and not threatened if other people have success and and do great around them and benefit the overall good. You also have to recognize that everybody has their own style. Their own quirks, their own issues, baggage, you could call it just the way they deal with it. You know, some people are really good at emails other people aren't. Some people are great at petitions, but you know, they they're short with people. And so I think a real leader has to look at somebody and see them in their totality, and recognize that everybody has strengths and weaknesses. You know, I have strengths and weaknesses. The people I work with have strengths and weaknesses. And I think all of those things are, you know, things that a real leader has, but, you know, probably, you know, the most important thing for me. If I had to sort of take everything and say what is the most important thing, and that is a real leader is someone that can really follow their convictions and do what they believe is the right thing to do. Particularly if it's an Then environment or a setting where others are, again telling you that you're wrong. You know, you don't have this right, you're making a big mistake. And I think a real leader sometimes has to say, you know, gee, I understand where you're coming from. And I know what you're saying, and I hear why you think this is a mistake. But it's important enough to me that I'm going to go ahead and continue to do this. Because in my heart and soul, I believe it's the right thing to do. And and there have been not a tremendous amount of times where I've had to do that. But there have certainly been times in my personal and professional career where I've had to sort of say, I don't care what anyone else says, This is what I'm going to do, and I'm going to forge forward.

kevin edwards  32:44  
Beautiful. Well said, Doug, and I just hope our audience appreciates this interview as much as I did today. talked about a lot though we talked about your journey from the nonprofit's and it's difficult to get some loan sometimes And why is that? So we're going to start a community bank. Financial Institution Clearinghouse and and what are some of the challenges with that redlining, stereotyping? How do we turn problems into opportunities? We talked about the Indian or Native American reservations today, and then the importance of sticking to your values. So, Doug, just want to appreciate your time coming here. Back on the real leaders podcast for Doug bestiary. I'm Kevin Edwards asking you to go out there, listen, find your own style, and empower people. And make sure to follow your conviction. Thanks to appreciate your time.

Douglas Bystry  33:35  
Kevin, thank you so much appreciate real leaders. Thank you. 

kevin edwards  33:39  
All right, folks, if you enjoyed that interview, make sure you are subscribed to the relators podcast because we are going to be featuring many of the 100 top impact companies coming up here throughout the months of February, and March. If you haven't listened to the ones that have been released already, by all means, check them out. As you will hear at the end of every single one, we are giving away a free Special Edition folks. That's right You heard it correctly, a free Special Edition when you go online to real dash leaders comm slash impact dash awards, and enter in your email, what you're going to receive are about 32 pages featuring our 100 top impact companies, their stories and what they deem as impact along with our cover story with miyoko shinar. So you won't want to miss it. It's all free folks. Go online. Again, real dash leaders comm slash impact dash awards. Do us a favor, sign up, get our email, and most importantly people keep it real

Transcribed by https://otter.ai