Evidence of meeting #39 for Indigenous and Northern Affairs in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was business.
A recording is available from Parliament.
NDP
Mathieu Ravignat NDP Pontiac, QC
Okay. What would those different financing structures look like? How could that be—
Chairman and Chief Executive Officer, First Nations Bank of Canada
That moves up the continuum.
Chairman and Chief Executive Officer, First Nations Bank of Canada
You can't look at any part of financing and say that money is capital and it all comes from the same place.
AFIs are developmental lenders. They bring small and medium-sized businesses up through that food chain and from non-business people to capable business people with some equity. They would take that equity, go to a commercial bank like ours, and start to leverage that up to become a big business.
NDP
Mathieu Ravignat NDP Pontiac, QC
But I guess what I'm referring to is that gap, right? The continuum only works sometimes, in the sense that sometimes you want to start something big, and you may not have the capital and you may not have the equity to do it.
Chairman and Chief Executive Officer, First Nations Bank of Canada
As I mentioned, there are three projects that I talked about. One of them was the significant investment of a first nations community in a hydro development project. They own 25% of four hydro dams in northern Ontario. They took part of their claim settlement for the land use and put that in as part of their equity, and they borrowed a couple of hundred million dollars. Today they have a project with a present value—not a future value of dollars, but a present value—of a billion dollars for a community of about 2,500 people.
The Moose Cree First Nation financed that through taking on a project that had a real partnership with Ontario Power Generation. They took a real piece of land that they effectively had equity in through their stake in the land claim, and they turned that into financing. I think their financing was in the mid-2% range for 17-year financing, because it was a real project that they had a real stake in and they could finance it through commercial purposes.
NDP
Mathieu Ravignat NDP Pontiac, QC
That's a helpful example. Thank you for that.
Moving on a bit, certainly in the government there are some resources that already exist to address the fiscal responsibility on reserves. There are some programs there that are not performing particularly well. I'm thinking, for example, of the land management act. I don't know if you have some comments to help improve those programs that are there but don't seem to be functioning.
Chairman and Chief Executive Officer, First Nations Bank of Canada
In many communities, the land management act works very well. It provides more certainty around the first nation.
For example, when they're doing a land lease for a commercial development such as a strip mall in the community, instead of having to go to Aboriginal Affairs and Northern Development Canada and wait in a very long line to get approval from the minister for a project that he or she knows nothing about, frankly, they have the local authority to develop that land in a purpose that meets the needs of the community.
I see the land management act in very many circumstances working very well. It's a good example of putting the right mechanisms in place to allow first nations to do what they can do with the resources they have.
Conservative
The Chair Conservative Blake Richards
Thank you very much.
Mr. Seeback, we have you again for the next five minutes.
Conservative
Kyle Seeback Conservative Brampton West, ON
I want to go back to the issues of capital that I was talking about before. For example, could a first nation business try to get a loan such as, for example, an SBL, through the BDC or some of the federal government programs?
Chairman and Chief Executive Officer, First Nations Bank of Canada
No. SBLs don't work on reserve because of the security issue under the Indian Act.
Conservative
Kyle Seeback Conservative Brampton West, ON
Is it the same issue with the Canada small business financing program?
Chairman and Chief Executive Officer, First Nations Bank of Canada
I think it's the same issue. I believe it is.
Conservative
Kyle Seeback Conservative Brampton West, ON
Right. So when you talk about having programs that creatively allow you to get around the issue of not having any security for these loans, that is only there if they can access one of the programs you referred to. Is that correct?
Chairman and Chief Executive Officer, First Nations Bank of Canada
Or they have their own equity. For example, many of the first nations with land claims now have a capital stake in a trust and are able to support and sponsor their businesses for future development. They have equity.
Conservative
Kyle Seeback Conservative Brampton West, ON
Yes, they have equity based on a different.... But an individual is not going to have the equity, by and large—
Conservative
Kyle Seeback Conservative Brampton West, ON
—and if they can't access one of these programs, then they are not going to have capital to be able to start up or expand a business. Is that correct?
Chairman and Chief Executive Officer, First Nations Bank of Canada
That's correct.
Conservative
Kyle Seeback Conservative Brampton West, ON
What are your requirements in these existing programs for someone who wants to start a business? I take it that it's not 100%, that not everyone who applies is able to get it. You must have some parameters for who is eligible to get into those programs. What are those parameters? How do you make that determination?
Director, Corporate Development, National Aboriginal Capital Corporations Association
AFIs, which began delivering the program on behalf of government about a year ago, have an analysis procedure they go through to try to nail down viability. If it is a viable enterprise, that's essentially a go-ahead. The client has to have minimal equity themselves and, with the additional support of client equity programming, if it becomes viable and they can accept the security position, the AFIs will provide the loan.
Conservative
Kyle Seeback Conservative Brampton West, ON
Viability seems fairly subjective. I know that all of these types of things are subjective, even when you go to a bank. For those people who get into the program—I'm just using an umbrella term “the program”, because I know there are many—what's the repayment rate or what's the failure rate?
Director, Corporate Development, National Aboriginal Capital Corporations Association
The repayment efficiency rate on the AFI loans is 95%.
Director, Corporate Development, National Aboriginal Capital Corporations Association
Yes.