Thank you.
[Witness speaks in Algonquin]
I'm from Kitigan Zibi. It's nice to be in the territory to present to you. My name is Francine Whiteduck. I am the CEO of the National Aboriginal Capital Corporations Association. Attending with me today is Kevin Schindelka, our director of corporate development. As you may know, NACCA supports a network of 58 aboriginal financial institutions that provide developmental loans and support services to aboriginal small businesses. Within the continuum of lenders that provide loans to aboriginal people, AFIs have a deep reach to communities across the country, are experts in risk assessment, and are highly focused and dedicated to meeting the developmental lending needs.
The AFIs have played a very significant role in Canada. They deploy capital to businesses and entrepreneurs efficiently. They have also played a huge role in creating an investment environment while contributing to building the financial literacy and planning required for the consumer and individual entrepreneurs in the aboriginal communities. They have also ensured that institutional capacity is growing, including the formation of expertise from the private and SME sector.
The AFI network has grown into a significant development loan lending force in Canada and has provided over $2 billion in loans to businesses owned by first nation, Métis, and Inuit people since the time the AFIs were formed in the early 1980s. Despite reaching this milestone, and even though in each of the last five years over $100 million in loans were advanced to aboriginal entrepreneurs, creating and maintaining approximately 3,800 full-time jobs in our communities and in the Canadian economy, the capital needs of aboriginal small business remain great.
AFIs have supports, and they deliver robust entrepreneurship programs and services effectively. In 2014-15, NACCA successfully rolled out the aboriginal development lending assistance program, a NACCA-designed initiative to enhance AFI sustainability. This initiative provides assistance to qualified AFIs to absorb the costs of capital shortfall tied to developmental lending, as well as pre- and post-loan care cost. Ultimately, this means that there is more money available for aboriginal businesses.
In 2016, NACCA will deliver additional equity products to AFIs that will enable them to provide equity, quasi-equity, and business support services for business development and for securing additional third party debt financing. While the equity programs continue to support businesses, the reduction of client equity programs over the last two decades will no doubt have a serious negative impact on the overall growth of the SME sector because of the increased cost of capital that results. The SME sector has proven to be the engine of development to create the jobs that are needed in Canada, and particularly in our communities. The reduced investment to grow the entrepreneurial sector comes at a time when the population of our community, as you know, is expanding.
While I raise this concern, there are some bright spots to note concerning the role aboriginal women play in the development of our communities and the economic contributions they make. Close to 30% of the equity contribution loans in 2014 throughout the network were provided to aboriginal women entrepreneurs. We are encouraged by the 2016 budget announcement of a proposed action plan for women entrepreneurs to help women business owners grow their business and succeed. Indeed, the AFIs, with their deep reach across communities, are positioned to foster greater entrepreneurial activity through partnerships, supports, and leverage, and we look forward to supporting women.
First, in thinking about our needs, we have to think about a dedicated fund to SMEs. We note that there is a need to restore, enhance, and innovate a dedicated SME fund to support aboriginal SME growth across our communities to strengthen entrepreneurship and business start-ups and expansions, as this will provide the jobs that are part of the solution for building healthy aboriginal communities and a thriving private sector, which will really lead to the changes we want to see in the communities.
Second, we also think there's a need to commit to a federal-wide solution to secure and ensure that aboriginal financial institutions obtain the resources and the debt and equity capital that is required for these institutions to continue building our communities. We are looking at new models.
In 2016, NACCA and our federal partner, Aboriginal and Northern Affairs Development Canada, will explore options for private sector investment that enables AFIs to access affordable low-cost capital. The AFI track record is vital for building new models of capital attraction. AFI repayment efficiency rates are at 95%, and a growing number of AFI loan portfolios can provide the adequate collective security that private investors demand. Most importantly, the aboriginal financial institutions demonstrate the ability to manage risk in the aboriginal communities. This creates the confidence that is necessary to attract private sector investment.
We are currently establishing the parameters required for a capital attraction tool, including the anticipated guarantees that would be necessary, the securitization requirements, and identifying the extent of a federal government role required to create a successful model to engage the private sector. The anticipated capital attraction model will be flexible and, while security and return on investment are certainly on the minds of private and institutional investors, there are other capital-raising opportunities related to emerging innovative finance solutions for impact investment.
Aboriginal people seek to use investment capital to drive positive social and environmental impacts. Clients of AFIs share stories about what it means to be able to provide for their families and to grow second- and third-generation businesses. This is what is important to our community. The types of lending that AFIs create provide positive benefits far beyond business results and include immeasurable improvements in the aboriginal people's quality of life. That's why I spoke of a dedicated fund. We have to really look at investing and increasing that.
Community members see success and recognize what is possible. Parents talk to their children, open their minds to opportunities and their creativity, and allow them to see their future potential. That's what SME development really is about.
I would categorically state that the AFIs have been in the forefront of social impact financing in Canada for many years before it became as well known as it is today. AFIs have measured the social outcomes of development and lending and linked these to financial returns.
In the aboriginal community, I know that there's a lack of financial wealth, but there is potential and there is no shortage of innovative ideas. AFIs bridge this gap by making capital available to entrepreneurs who will build success in their respective communities. This is what we think about when we think about the SME sector and the role that AFIs have played in our communities, not only in the past but going into the future.
Thank you for inviting NACCA to speak today. We look forward to all of these developments.
Meegwetch.