On behalf of the Canadian Bankers Association, its 50 members, and its quarter-million employees in Canada, I would like to thank you very much for the invitation to speak to the committee on the subject of the competitiveness of Canadian agriculture. My members are here to answer your specific questions, so I will keep my comments brief. I will, however, take a moment at the outset to put the banking industry and its association with agriculture and rural communities into some perspective.
Needless to say, the prosperity of the agricultural community and rural Canada go hand in hand. The banking sector, of course, has a strong commitment to both. CBA member banks have about one-third of their branches in rural and small-town Canada. Through these roughly 2,100 branches, they provide a wide range of products and services to farmers, their families, and ancillary service providers in the overall rural community.
On the business side, banks provide deposit and operating accounts, insurance, investments, and financial advice, in addition to operating term and mortgage loans. On the personal side, they help rural customers save for their children's education and their own retirements through mutual funds, specialized advice, and specialized accounts. They provide lines of credit, loans and mortgages, and everyday banking needs. In short, customers in rural Canada have access to the same services and prices as customers in Canada's largest cities.
While banks are private sector, profit-seeking institutions that provide financial services to customers, they also work closely with government to provide delivery channels for a number of government programs, such as the advance payments program, FIMCLA loans, the soon to be established AgriInvest accounts, and CALA loans. We look forward to continuing this positive relationship with government. The banks are also working with the government on a broader range of credit initiatives, such as BCAP, the business credit availability program.
While I will discuss non-credit aspects of banking in a few minutes, let me first speak to credit issues, as they are on everyone's minds today.
In granting credit to any household or business, banks look to the ability of the borrower to repay the loan. They make decisions on an individual, case-by-case basis. But there are also macro conditions that need to be considered, such as the prospects for the business sector the borrower operates in, economic prospects in general, the cost to the bank of raising funds, and so on.
The agricultural sector is an important market for bank lending. Eighteen per cent of total funds lent to small and medium-sized enterprises is dedicated to this sector. That's almost one dollar in five. The amounts authorized for agricultural producers and related services tend to be higher, on average, than in other industry segments in recognition of the capital- and land-intensive nature of farming. Moreover, growth in bank lending has been in line with the sector's growth. Between 2001 and 2008, banks have expanded lending in Canada at roughly the same rate of growth as farming output. The provision of bank credit has been consistent with and appropriate for growth in the sector.
Each individual bank provides credit to the sector in competition with other banks, credit unions, caisses populaires, Farm Credit Canada, finance companies, and provincial government agencies. In aggregate, banks had authorized almost $30 billion in financing to the sector at the end of 2008. That is the amount banks actually offered to provide to their customers. Chartered banks provided 39% of total farm credit in 2008.
It's also important to look at the nature of financing banks provide. Banks are the largest providers of non-mortgage credit. Banks accounted for 51% of this lending, close to $14.7 billion, in 2008. As this type of financing is more complex than lending against assets, it requires the banks to truly understand their customers and to work closely with them over time. The Canadian banking system is today internationally recognized for its safety and soundness due to its prudent lending practices and excellent risk management systems, practices and systems that we use in agricultural lending as well. These are what enable Canada's banks to continue to extend credit to businesses, even if some other parts of the financial marketplace are contracting. Moreover, as the experience in other jurisdictions shows, poor risk management is not just bad for lenders, it can have negative effects on borrowers as well.
As noted earlier, banking is about more than simply lending money. It's a relationship business, and nowhere is this more evident than in the agricultural sector. The relationships we build with our farming clients and agricultural stakeholders help us play an important role in supporting the sector. These relationships have helped us work with our customers through the inevitable peaks and troughs that come with working with this sector.
In this past decade, we have seen farmers withstand BSE, avian influenza, drought, floods, and now H1N1 virus and country-of-origin labelling. When these inevitable events occur, we work with farmers on a client-by-client basis, taking into account their individual situations, to find solutions that are sustainable and in their best interests.
Sometimes banks need to have tough conversations with clients so that farmers can make decisions that preserve the capital of the farming operation. The banking industry's work during these events is testament to the importance we give to the sector and to our interest in contributing to its long-term viability and competitiveness.
The key to the strong relationships we have with farmers is understanding their circumstances. Banks hire individuals with a P.Ag. designation: university graduates with an understanding of the agricultural sector. These individuals are account managers and specialists who advise farmers on matters such as farm loans, economic forecasting, farm business planning, and general farm management.
They serve their clients through non-traditional means and modern technology. They employ cars and laptops to meet with clients at their farms in order for them to spend more time on their business and with their family. The banks dedicate resources to educate them through programs such as Olds College bankers school. These account managers and specialists often move up the agriculture-specific credit and risk adjudication positions.
We also educate our clients through presentations dedicated to the agricultural sector, such as business and succession planning. We also sponsor events and groups of farmers such as the Royal Winter Fair and 4-H groups.
Mr. Chair, I'm sitting here with my colleague Bob Funk, and we have a number of bankers who are sitting on the side. They all have specific stories that they would like to tell the committee. I hope we have an opportunity for them to tell their stories, because individual banks have different products.
I'd like to thank you for the opportunity to appear before this committee. I've tried to keep my opening remarks short, but we would like to talk about some specific initiatives for the sector, such as the full service approach to banking, new flexible credit products, initiatives for young farmers, client education, mobile banking, and a wide range of banking channels.
We would be pleased to answer your questions. Thank you.