Many Indian tribes struggle to build internal economies on reservations. That’s because they often don’t have the basic structures of an economy in place, like a financial record system. That makes banks nervous. An agreement signed by the Minnesota Secretary of State and Leech Lake Band of Ojibwe on Oct. 21 attempts to eliminate that roadblock.

The state and the Leech Lake band of Ojibwe signed a joint governmental agreement that allows Leech Lake to use the state’s financial filing system. Although the agreement sounds pretty dry, it marks a significant milestone for American Indians in Minnesota.

 "I’m looking forward to being able to talk about this day as history day, as an historic day, and have it be a point where people say, ‘oh yeah, that’s when many good things began to happen,’" Secretary of State Mark Ritchie said.

The Federal Reserve Bank of Minneapolis considers the agreement a foundational step to improving economies on Indian reservations and the surrounding areas. The Minneapolis Fed’s community engagement manager, Susan Woodword, said Leech Lake and other Indian governments don’t have commercial laws to keep track of financial transactions.

Without such laws, Woodward said, lenders in Indian country were confused and uncertain that loans with tribal members would be properly recorded.

"The lending environment is murky," she said. "If the tribe doesn’t have a secure transactions law, does the state’s law apply? Well, maybe, but we’re not sure. There’s just a tremendous amount of uncertainty."

Woodrow said it’s very expensive for Indian governments to set up a records system that essentially combines the qualities of a database, a search engine, and an immense filing cabinet. But state governments have those systems – systems that banks are familiar with and consider dependable.

A joint governmental agreement that allows an Indian nation to partner with a state government to share a filing system seemed the best solution, she said.

Woodward worked for four years with a national organization called the Uniform Law Commission to draft legislation that would legalize such an arrangement. By 2005 they had proposed secure transactions laws Indian governments could tweak to their own specifications.

The first to pass the laws and set up the system was the Crow Nation with the state of Montana.

Woodrow said it’s still too early to really gauge the effect these agreements have.

Still, in fall 2008, the Leech Lake Band of Ojibwe heard about the secure transactions law at an economic conference and decided to investigate. Last year, the band approved the law and paved the way for the agreement with the state.

Wally Storbakken, the band’s economic development director, said it’s taken a long time for a partnership like this to happen, in part because of federal laws that restricted the agreements states could make with Indian nations. Another factor was the Indian people’s fear of giving up part of their sovereignty.

"Times have changed. And we as sovereign people are not about to be taken advantage of, which is probably what the federal government was looking at when it initially prohibited its citizens or states from dealing with Indians," Storbakken said. "They were trying in their way to protect us as Indians."

But since the U.S. government signed treaties with Indian tribes, American Indians have become participants in the larger society, and understand economics.

"We see where there are barriers and we know we can take them down and not open ourselves up to potential harm," he said. "That’s what we’re doing here."

Leech Lake is now the third Indian nation to become a partner with a state government, and the first in Minnesota. Madonna Peltier Yawaki, co-chair of the Minnesota Indian Business Alliance, said other tribes in Minnesota will follow. But it may take some time.

"I think that’s the story of Indian country, tribes where ever they are, is that change takes time and good change makes a difference for our future forever."

Yawaki said the agreement signed at the state capitol will allow Indians to realize their economic potential for the first time.

Minnesota  Public Radio News can be heard on MPR’s statewide radio network or online.