Bank of North Dakota

The Bank of North Dakota was established by legislative action in 1919 with $2 million (equivalent to $37,140,115 in 2025) to improve access to credit within the state and thereby promote agriculture, commerce and industry in North Dakota. At the time, the economy of North Dakota was based on wheat farming. Droughts, price suppression by grain dealers, price increases by farm suppliers outside the state, as well as the high interest rates (up to 12%) set by commercial banks in the Twin Cities and New York City on farm loans made it hard to make a living as a farmer in the state.

The bank was initially conceived by populists in the Non-Partisan League, who wanted to reduce farmers' dependence on out-of-state corporations via regulation and public ownership of economic infrastructure. Grain, railroad, and banking trusts strongly opposed the new bank, and sought various measures to prevent or limit its creation. These included funding an opposition party, suing in state courts to prevent the bank's sale of bonds, and then boycotting said bonds. These actions delayed the bank's capitalization until 1921.

Originally proposed as a credit union-style institution to free the farmers of the state from predatory lenders in Minneapolis and Chicago, the business-backed Independent Voters Association then pursued political processes to force the bank's closure. The recall of NPL Governor Lynn Frazier effectively ended that plan, with BND taking a more conservative central banking role in state finance.

During the Great Depression, teachers were paid with warrants of payment. The BND paid teachers in the state full price, as opposed to the 15%-discounted payments they would have received elsewhere. In the 1940s, the Bank sold back farmland that had been foreclosed in the 1930s to the same families at below-market prices.

In the 1940s and 1950s, BND shifted towards a more passive policy, focusing less on farm loans and more into managing the state's investments and providing services to local banks. It began making transfers (akin to dividends) to the state's general fund in 1945.

The services provided by and scope of the Bank increased significantly under the governorship of William L. Guy. During this period, the bank increased partnerships with other financial institutions to provide participation loans, making its first Small Business Administration loan and first participation loans in 1965. It also provided the first federally-insured student loan in the US in 1967.

COVID-19 pandemic

The BND's support of small commercial banks was important in their ability to provide relief during the COVID-19 pandemic, leading to North Dakota having the highest density of approved paycheck loans in the United States. Larger banks were slower to move due to their increased layers of decision-making, while smaller local banks were able to take advantage of their local communication networks, understanding of their customers, and the fact that paycheck loans tended to fit their average loan size to be faster at approving loans.

The bank uses its funds in three basic ways: short-term loan and bond financing for local and state infrastructure projects, direct lending to private borrowers, and banking services for local banks.

Public sector

The state sometimes uses BND's profits to help balance its budget.

Private sector

The BND also guarantees student loans (through its Student Loans of North Dakota division) and business development loans, especially for agricultural startups.

Bank-to-bank services

The BND serves as a wholesale bank for the state's community banks and credit unions. It participates in loans created by the local banks by expanding their size, providing loan guarantees, and "buying down" interest rates. Additionally, it buys loans from bank portfolios as well as community bank stocks. The bank provides other banking services to local banks, such as clearing checks, acting as depository for their reserves, and providing federal funds.