Thank you. Good afternoon everyone. The Canadian Credit Union Association welcomes the opportunity to brief the committee in relation to agricultural debt and its effects on Canadian agriculture. I am the deputy director of policy at CCUA. We are the national trade association for about 281 credit unions. These are credit unions that are outside of Quebec.
With me today is Frank Kennes. He is the vice-president for agriculture and commercial services at Libro Credit Union in southwestern Ontario, around London. Frank will give you a practitioner's perspective on farm debt and its impacts.
As some of you may know, credit unions are financial co-operatives that offer retail banking services to their member owners. Credit unions are 100% Canadian owned and are competitors to the big banks. We serve over 5.6 million Canadians outside of Quebec.
Collectively, credit unions employ more than 27,000 people and manage over $202 billion in member assets. In terms of market share, credit unions hold about 6.3% of domestic assets in the financial sector held by deposit-taking institutions, but we have over 11% market share in the small and medium-sized enterprise market.
As some of you may know, credit unions are the mainstay of many rural communities outside of Quebec. In many cases, credit unions that now provide services to rural communities were established by the initial investments of farming families that felt poorly served by institutions headquartered, as we know, in Toronto.
From modest beginnings, credit unions have grown, and now have about an 11% agricultural market share, outside of Quebec. In Manitoba, it is much higher. We have a 26% market share. In Saskatchewan, we have 18%, and in Ontario, where Frank is from, it's 9% and growing quite rapidly.
As co-ops, credit unions exist to serve their member owners. In an agricultural context, that means we are committed partners to Canadian agriculture, and we weather the ups and downs of the sector, along with producers. In downturns, we do not readily pull up stakes and look for returns elsewhere. Rather, credit unions share the economic fate of the communities they serve. In fact, there are now 380 communities in rural and remote Canada where a credit union is the only bricks and mortar financial institution around.
While agriculture is a cyclical sector with its ups and downs, we nevertheless view the future of Canadian agriculture with some tempered optimism. Canada has a diversified farming economy that has a strong international reputation for producing sustainable, high-quality, and safe agricultural products. We see expanding international markets for our agricultural products. As many parts of the world become more affluent, their purchasing power increases and they look for Canadian products.
That said, we recognize that farm debt has been increasing at a steady rate and has more than doubled since 2000. At the end of 2015, outstanding farm debt sat at $92 billion. This rate of increase and that large headline number have attracted attention and concern among some observers.
While we are not dismissive of these concerns, we believe that lenders and policy-makers should look beyond the headline farm debt numbers at other farm financial ratios when assessing the health of a farm or considering the sector as a whole. When we look at these other ratios, the financial health of the sector is less concerning.
First, from a liquidity standpoint, Canadian farms are in a good position to handle their short-term debt obligations. For example, at the end of 2015, farm operations in Canada had a liquidity ratio of 2.38%. That is roughly equal to the average of this ratio for the last 15 years, so it's not out of line. This ratio is useful because it compares the value of current assets, which are cash, accounts receivable, and inventory, with current liabilities, which are debt and accounts payable. A ratio lower than 1 signals that the farm doesn't have the short-term assets to cover short-term obligations, and of course, that means trouble.
Another perspective we look at is the debt-to-asset ratio. We see a similar situation, with this ratio at 15.5% at the end of 2015. This is well below the 15-year average of 16.7%. The debt-to-asset ratio indicates whether a farm would have the assets to cover all of its liabilities if those assets were liquidated. A low ratio indicates that the operation can meet its financial obligations. Admittedly, steady land value appreciation has played a role in keeping this ratio below its 15-year average.
Farms have also enjoyed a healthy return on assets. At the end of 2015, the Canadian farm return-on-assets ratio sat at 2.3%, just slightly below the 15-year average of 2.6%.
The appreciation of farmland has also been at work here with the increased land prices putting downward pressure on profitability.
To sum up, while it's important for farmers, lenders, and policy-makers to watch headline farm debt numbers, it's also important to look at other ratios that contextualize this debt. When we do this, the farm debt number is less concerning.
With that, I would like to turn it over to Frank to provide you with his perspective as a long-term agricultural lender at Libro Credit Union.