Madam Speaker, I am rising on a question that I raised in the House on April 19 to do with aboriginal financial institutions.
I asked the minister why aboriginal financial institutions were not part of the loan loss reserve program. When the minister replied, he acknowledged that aboriginal financial institutions are tremendously important and went on to talk about his obvious support for the AFIs.
There is a small pilot program called the loan loss reserve, which is a financial instrument that offsets a portion of commercial lenders' potential losses and creates an incentive for the financial institutions to provide loans to businesses that would otherwise fall below the lender's standard for acceptable risk. This pilot makes this loan loss available to five financial institutions but excludes the aboriginal financial institutions.
I am raising this issue because these aboriginal financial institutions were created as a result of the Royal Commission on Aboriginal Peoples. There are currently 57 aboriginal financiers providing loans to on-reserve enterprises that cannot obtain funds from regular banks. This emanates from a report that was done by APTN.
This same report talks about the fact that aboriginal banks issued over 100 million dollars' worth of loans in 2008-09. In 2009 81% of the loans were reported as current. They have been in business now for 20 years.
Alan Park, the CEO of Tribal Wi-Chi-Way-Win Capital Corporation, said that aboriginal lenders had become a success story, turning the initial $200 million injected by the federal government into 1.3 billion dollars' worth of investments.
Part of the argument around it going out to the major banks and credit unions was that they would be able to lend more money because they have a different financial base. In fact, there have only been five loans to date by private lenders through the loan loss reserve program, only one of which has been outside the long-standing AFI mandate.
That single loan was for $2 million, with the four remaining between $250,000 and $375,000, which are all well within the limits of the AFIs. Therefore, 80% of those loans provided under the loan loss reserve program were within the standard AFI loan practices.
It is clear that the $15.5 million that was provided as loan loss guarantees to these five other lending institutions is not reaching the targeted market that the loan loss reserve program was initially set up for.
According to a report by Jorge Barrera of APTN National News, while $15.5 million was given to the loan loss reserve program within the last year, only a little over $3.2 million was delivered in client loans.
Not only are they lending within a group that is already available through the AFIs, they only lent out a small fraction of the money that was available to them.
The article goes on to state that this poor market penetration reflects conventional lenders' lack of motivation and the undesirability of conventional lenders to the client base. In the same period AFIs provided 1,250 loans totalling in excess of $100 million.
It is very clear that these organizations have a very good track record. I would ask the government why there has not been an adequate answer as to why the AFIs were excluded from the loan loss reserve program.