Thank you, Mr. Chairman.
Mr. Richards, members of Parliament, Chief Moody, and speakers, thank you for giving me the opportunity to talk about access to capital and some solutions that we have developed over time.
If you don't mind, I will continue in French in order to be more efficient, given the time that's in front of me.
I would like to talk to you about the problem of First Nations’ lack of access to capital. My colleagues here today, members of the National Aboriginal Capital Corporation Association (NACCA), have explained this problem very well. My organization has also been a member of NACCA since 1992.
First among the factors at play in the problem of First Nations’ lack of access to capital is section 89 of the Indian Act, which stipulates that the property of an Indian on a reserve is not subject to seizure. Another factor is that communities are located a very long way from the large financial centres. Aboriginal communities are also clearly characterized by cultural differences. A traditional banker, who is not fully aware of an environment, will generally be hesitant to provide financing.
Aboriginal people generally have difficulty in securing access to capital. Aboriginal entrepreneurs are not immune from this reality. That is why, in 1995, the federal government, in conjunction with First Nations, launched the Canadian Aboriginal Economic Development Strategy by injecting $345 million into First Nations. That sum included $200 million to create SOCCA, the native commercial credit corporation. I am the President and General Manager of SOCCA, which was established in 1992 with an initial capitalization of $5 million, plus an additional $3 million that came from the federal government, for a total capitalization of $8 million.
From 1992 to today, we have provided $60 million in loans. We have invested in more than 500 business projects, for a total of 650 business loans. The capital of $8 million is now $11 million. Our capital has borne fruit. For SOCCA, I feel that the best is yet to come.
Another of SOCCA’s accomplishments is that we have opened the door to establishing partnerships. We have been working for a number of years with the Mouvement Desjardins in Quebec and with the Royal Bank of Canada. We see SOCCA as a kind of pioneer. It has opened doors and introduced the aboriginal market to major financial institutions. Over time, we have seen that large banks and credit unions, once reluctant to provide financing to aboriginal communities, have become more and more involved, having recognized that good business opportunities exist there.
SOCCA has been involved in education and development. By so doing, it has prepared the market, in a way. At the beginning, we financed small companies and those companies, with a positive experience of credit, quietly moved to large financial institutions. In 2005, in the course of its activities, SOCCA noticed that communities had other kinds of needs, specifically in housing, which was a very serious problem.
I will not go through all the details with you, but you know that aboriginal communities all across Canada have a housing backlog that runs into billions of dollars. Solutions must be found. In 2005, SOCCA started another organization, the Aboriginal Savings Corporation of Canada. To begin with, it was a pilot project. The corporation had no capital and relied on SOCCA’s financial capabilities.
The pilot project consisted in testing the market and issuing $1 million in bonds for sale to First Nations’ members who had a taste for saving. The first bond issue was around $1 million, but our objective was actually more modest.
We told ourselves that, if we sold $500,000 worth, it would be a success. The day before the bonds were issued, we had already reached the million. After the pilot project, we continued issuing bonds. Since 2005, we have had 18 bond issues with a total capital of $22.3 million. Basically, the bonds have all been sold to the members of eight different First Nations.
In 2012, we also opened the market to large institutions. Three bought Aboriginal Savings Corporation of Canada bonds, including the Native Benefits Plan, the aboriginal pension fund in Quebec, which today is a half-billion-dollar fund.
To whom do we make loans? Basically, the money assembled from the bond issues is lent out for the communities’ housing needs. To date, we have 57 borrowers and we have made loans totalling $24 million. The market we are targeting first and foremost is made up of solvent individuals who wish to own their own homes. We also work with First Nations band councils that have their own housing funds. When the funds need capital, they can come to us for a loan. We also make loans for community housing projects.
The loans we make come with training programs tailored to the reality of the communities we serve, depending on their level of advancement.
One of the objectives for ourselves and for the Aboriginal Savings Corporation of Canada is to change the way in which things are done, to change mindsets, and to move from a system of dependence in a community to a system based on responsibility.
Dependence in a community is when tenants see their housing as first and foremost an obligation that the band council has to them. Housing is too often seen as their due, not as an opportunity for a future investment in their heritage.
Tenants basically depend on the band councils. In turn, band councils depend on governments for ministerial guarantees and financial contributions. We have to acknowledge that, in the current climate of austerity—a very popular word in Quebec at the moment—money is not always on the table and not always available.
The lenders collect all the profits and take almost no risk. They make the loans, they make money and they are backed by ministerial guarantees. The big losers, in fact, are band councils, who pay the bills knowing that a ministerial guarantee ultimately means that their operating budgets are going to be reduced.
That system has to be changed and everyone involved must be given responsibility. That includes the lenders, who clearly are going to want to continue making a profit and getting some performance from their capital. However, we need to educate them so that borrowers take risks—borrowers and band councils—but also First Nations members with a home or housing of some kind. They also have to assume some responsibility.
Rather than to have them as tenants, our objective is to make them homeowners. When you own your home, you are inclined to take care of it. You are inclined to maintain it because it may become one of the major assets in your legacy, and when you retire.
However, we must not be under any illusions. Moving from a system of dependence to a system of responsibility is not going to happen overnight. It will take time.
We need pilot projects, pioneers and organizations with development as their mission that are going to quietly create a housing market in the communities. That is much like we did with the entrepreneurs with the Native Commercial Credit Corporation and it is what we intend to do with the Aboriginal Savings Corporation of Canada. The change will be gradual. We will have to be patient, but we are also going to need the commitment and support of the government to allow the changes to happen.
Rather than opting for a system of ministerial guarantees, the government should consider the possibility of providing the means to make the investment products offered to investors and those with money work. What must be guaranteed, then, are the sources of capital rather than the loans. The management of the risk and the loans must be left in the hands of the organizations that know the market well and who specialize in it.
Thank you.