Indigenous and Northern Affairs Committee on May 12th, 2015

[The Chair, Conservative, Blake Richards]

We'll call this morning's meeting to order.

We want to thank both of our organizations for being with us today. We're here for our 41st meeting of the Standing Committee on Aboriginal Affairs and Northern Development, under our study on access to capital.

We have with us this morning, the Business Development Bank of Canada, Mr. Robert Lajoie, the vice-president, financing and consulting for Manitoba, and national director for aboriginal banking; and Mr. John Connell, vice-president of government relations. We also have the First Nations Lands Advisory Board, Chief Austin Bear, who is a director and with the Muskoday First Nation in Saskatchewan; and William McCue, director, and a councillor from Georgina Island in Ontario.

We've had a little pre-consultation, and, Chief Bear, I believe you're going to do the first presentation on behalf of the First Nations Land Advisory Board. You have 10 minutes for your opening remarks. Then we'll have opening remarks from the Business Development Bank, and then we will turn it to members for questions.

Chief Bear, the floor is yours for the next 10 minutes.

[Chief Austin Bear, Chief, Muskoday First Nation, Saskatchewan, and Director, First Nations Lands Advisory Board]

Thank you.

Good morning, Chairman Richards and honourable members of the committee.

Just briefly, I was introduced, of course and you heard my name as Austin Bear. I'm the chief of the Muskoday Cree nation, Treaty 6, in what is now the province of Saskatchewan. Our community is only a few kilometres from the city of Prince Albert.

Thank you, Mr. Chair and the committee, for inviting our organization here this morning and this opportunity to share the activities, the developments of first nations across the country.

On behalf of the First Nations Lands Advisory Board, I want to thank you sincerely for the opportunity to speak to you today about the Framework Agreement on First Nations Land Management and our experiences with vastly improved access to capital. As the majority, if not all, first nations communities can attest to, the Indian Act has been most devastating to our communities economically, culturally, and socially. At the root of this dysfunctional piece of legislation is the complete lack of recognition and respect for first nations as governments, governments that are certainly capable of competent decision-making.

Add to this a complete lack of land certainty, serious environmental legacy issues, unclear survey fabric and boundary issues, a land registry that isn't backed by formal regulation, and an inefficient system of bureaucracy, based on a 100-year-old statute. It becomes quite easy to see why the situation creates many problems.

My colleagues and I are part of a growing group of first nations who, in the 1990s, had enough of federal government dependency and waiting around for things to get better. We negotiated and signed an agreement with Canada in 1996 that would provide us with some greatly needed relief from some of the most offensive and paternalistic sections of the Indian Act.

The framework agreement is, first, a recognition that our communities are governments with legislative and management authorities over our lands and resources. Land, as you will likely know, is inextricably linked to our cultures and our identities. The framework agreement is an expression of the inherent right of self-government. We believe that the authority of government flows from the Creator, not the Minister of Aboriginal Affairs.

While this might seem to be a mundane attribute, it is considered to be a basic respect, which is the core of our government systems. It lies at the base of our cultures. As a primary tenet of the framework agreement, it has translated to concrete, measurable, and proven advances for our communities over life under the shadow of the Indian Act.

Economic development and increased access to capital have been major benefits to many of our signatory first nations. For a community that has decided to opt into the framework agreement, decisions can be made in a matter of days and weeks, as opposed to months, years, or never, under the Indian Act. This means the virtual elimination of unnecessary land transaction costs defined in time and other tangible expenses. It also reduces or eliminates countless missed opportunities due to these same delays.

Clear legal status and capacity of first nations governments to acquire and hold property, to borrow and contract, to expend and invest money, and to be a party to legal proceedings: first nations under the Indian Act do not hold these clear rights. This discourages lenders and other financing partners.

A land registry that is regulation backed, paperless, electronic, and provides for instant registration, we developed this in cooperation with key representatives from the finance community as well as the Government of Canada. Not only have key financial institutions taken notice of these improvements, but so have third party investors and the insurance industry. For the first time it is possible to get title insurance on reserve lands. All of these attributes were made possible without having to risk the loss of our reserve lands.

The KPMG consulting firm has concluded three separate studies of first nations that are operating under their land codes and has found that framework agreement first nations are able to complete transactions more efficiently than Canada. Framework agreement first nations can do the job for less cost than Canada. Framework agreement first nations are increasing the average annual number of land transactions by a 9% rate as opposed to transactions by first nations under the Indian Act, which are decreasing on an average of 1%.

The framework agreement provides better circumstances for first nations to improve their land governance systems and processes, such as governance and decision-making, and the facilitation of market opportunities. Also, the framework agreement is impacting economic development efforts on reserve lands. The framework agreement has contributed to first nations' increasing the number of businesses on reserves, with most new businesses being first nation member-owned businesses, which shows increased entrepreneurial activity.

The framework agreement first nations are expanding their business development to new and/or different industry areas with new partners. Framework agreement first nations are beginning to see a shift in the quality of jobs available on reserve by providing jobs that require higher levels of education and specialized training. Over the past while, at least 2,000 jobs have been created by first nations people in first nations communities.

Framework agreement first nations have experienced increasing internal and external investment in their communities, $101 million in investment approximately, as identified by a sample of only 17 framework agreement first nations. Additionally, this investment occurred in more areas than before: hard and soft infrastructure, business regeneration, and growth and new businesses.

It is worth noting that all of these benefits have also meant tremendous ongoing work and the overcoming of significant challenges, but not one first nation that has implemented the framework agreement has indicated that they would like to give up and go back to the Indian Act, not a single one of the 54 or 55 operational first nations, nor the 112 signatories to the framework agreement.

Of course, we would be happy to answer any questions.

Thank you, sir.

Thank you, committee members.

[The Chair, Conservative, Blake Richards]

Good.

Thank you, Chief Bear.

Mr. Lajoie, from the Business Development Bank, I think you're making the next presentation. The next 10 minutes are all yours.

[Robert Lajoie, Vice-President, Financing and Consulting, Manitoba, and National Director, Aboriginal Banking, Business Development Bank of Canada]

Thank you.

Mr. Chair and distinguished members of the committee, thank you for inviting me to join you today to support your study on access to capital, and to tell you about the support provided by the Business Development Bank of Canada, or BDC, to aboriginal entrepreneurs.

As the BDC's national director of aboriginal banking, I manage a dedicated and passionate team that serves one of the most complex, dynamic and fastest growing markets in the country.

For those who may be less familiar with BDC, I will first provide you with some general information on its activities in support of Canadian entrepreneurs. I will then focus on our aboriginal banking unit, or ABU.

Let me begin by reminding you that BDC is the only bank in Canada dedicated exclusively to meeting the needs of entrepreneurs, with a focus on small and medium-sized enterprises. As a complementary lender, we have a greater appetite for risk than other financial institutions and we price accordingly. However, we're not the lender of last resort. Indeed, as per Treasury Board guidelines BDC must be financially sustainable. BDC does not receive government appropriations to run its daily operations. In fact, the bank has paid dividends to the Government of Canada since 1997.

We are proud to help over 30,000 Canadian SMEs that employ 674,000 Canadians and generate $192 billion in revenue annually.

Approximately 15% of our clients, or 5,000, are exporters. Our services include financing and growth and transition capital, formerly known as subordinate financing. We also offer affordable consulting services and are the largest institutional venture capital investor in Canada. Of our 30,000 clients, approximately 1.25%, or 378 clients, are aboriginal, representing $184 million in assets.

I would like to take a few moments to tell you about our team. The ABU stretches across Canada and is made up of nine dynamic individuals with over 55 cumulative years of service. Our team is committed to giving back. Members participate in 13 volunteer positions in their communities. While located in six offices across the country, we partner with aboriginal financial institutions and more than 100 BDC business centres across Canada.

The goal of BDC's aboriginal banking is to accelerate the success of aboriginal entrepreneurs by providing them with the tailored support that they need. In addition to flexible financing solutions and affordable advisory services, ABU has developed growth capital for aboriginal business, the aboriginal business development fund, and the E-Spirit national aboriginal youth business plan competition .

Not only does the ABU deliver unique services; it delivers them in a way that respects aboriginal culture and understands the unique challenges aboriginal businesses face. In fact, I myself am Métis, and several of the members of our growing team are aboriginal.

Aboriginal entrepreneurs rely mostly on personal savings to start up their businesses and even to finance ongoing operations. Well aware of this reality, BDC seeks to increase access to capital for aboriginal entrepreneurs, with commercially viable businesses located on or off reserve through its flexible financing solutions.

With growth capital for aboriginal business, aboriginal entrepreneurs on or off reserve can apply for up to $25,000 for their start-up business or up to $100,000 for their existing business. This is in addition to being able to access other BDC loans to top up their financial requirements. There are no application or annual fees. The debt-to-equity ratio of the business we support can be up to 4:1 debt equity, as distinct from our regular 3:1 debt equity. We refund a portion of the interest paid on the loan to the community under a special provision.

As you have heard from some of the other witnesses who have appeared in the context of this study, aboriginal entrepreneurs on reserve cannot leverage their lands and assets as collateral, as per section 89 of the Indian Act. Given this challenge, BDC provides financing on reserve primarily through loans made to corporations.

This is done to simplify the enforcement process, because we cannot seize or sell assets that belong to band members. When real estate is involved, we rely on mortgage of lease to secure our loans and we obtain a band council resolution to ensure that we have access to the band lands in the event of default.

When financing first nations projects, we work closely with other lenders, such as chartered banks, credit unions, and aboriginal financial institutions, in order to extend capital to aboriginal entrepreneurs. We satisfy our mandate as a complementary lender by taking more risk on projects that we finance and by partnering with other lenders when there is a funding shortfall on their projects. By doing so, we provide funding when it might otherwise not be available and we reduce other lenders' exposure to risk. By working with AFIs, we help them touch more entrepreneurs and extend more capital.

Our aboriginal business development fund provides microcredit lending for aboriginal entrepreneurs. These microloans of $2,000 to $20,000 are made available through grassroots aboriginal organizations across Canada, such as the Nuu-chah-nulth Economic Development Corporation in British Columbia. These loans are coupled with management skills training and ongoing mentorship.

This fund was created as a result of aboriginal entrepreneurs reporting the need for business management mentoring. This initiative increases access to capital for aboriginal entrepreneurs who would not normally qualify for a loan. In addition, the training and mentorship elements greatly benefit the community and create entrepreneurial capacity within it. The ABDF serves as a business model for other communities as well.

Our ABU also seeks to create awareness in the marketplace, especially amongst aboriginal youth. As you have heard from other witnesses, building business skills and awareness of self-employment opportunities is key to the economic success of first nation communities.

In order to reach aboriginal youth, we have our E-Spirit business plan competition. It is Internet-based, allowing us to reach youth in remote areas, and includes online modules, mentoring, and business plan preparation. The program incorporates both mentorship and elder components. Schools can also receive a computer to access online resources.

E-Spirit teams must submit a complete business plan and a video promoting their business idea. The winners take away cash prizes in the amounts of $4,000 for gold, $2,000 for silver, and $1,000 for bronze. In addition, special recognition awards are given for the best in various categories. E-Spirit helps aboriginal youth develop business and management skills and increases overall entrepreneurial awareness. To date, we have reached more than 6,500 grade 10 to grade 12 students through this program.

To conclude, I will again say that we are committed to making the most of the potential of aboriginal SMEs. We are working to ensure that they have all the tools and support they need to succeed. With the aboriginal banking team, our priorities are to improve the client experience and expand our reach and visibility. We are building our team and further developing our skills and our knowledge, which are unique in this field, to better serve aboriginal entrepreneurs and support their growth.

Thank you for your attention. We would be pleased to answer your questions.

[The Chair, Conservative, Blake Richards]

Thank you, Mr. Lajoie.

Now we'll go to questions from members. In the first round we have seven minutes for each questioner.

First is Ms. Ashton, so the next seven minutes are yours.

[Niki Ashton, NDP, Churchill, MB]

Thank you very much, and thank you to all of our witnesses for joining us today.

Chief Bear and Mr. McCue, I wonder whether you could speak about the number of first nations waiting to be added to the schedule of the First Nations Land Management Act and perhaps update us on what you're hearing from these first nations and their desire to move forward in this respect.

[Chief Austin Bear]

Thank you for that question.

I mentioned briefly earlier that at the moment there are, I believe, 112 signatories to the framework agreement, with 54 or 55 operational across the land. Using the last number I know, there are about 60 to 65 first nations across the country that wish to sign adhesion to the framework agreement and become new entrants to it.

[Niki Ashton, NDP, Churchill, MB]

Is it important that we speed up that process and support these first nations in joining the program?

[Chief Austin Bear]

Absolutely.

Just recently, it was announced by the minister and the lands advisory board that there will be six new entrants from British Columbia, Saskatchewan, Ontario, and perhaps Quebec. Those are not new entrants, although they are first nations new to the process. They are not new entrants with an announcement from the minister on new moneys or the announcement on the $30.3 million of support over the next little while.

These are six first nations who are filling in for six other first nations who either were unsuccessful or had to withdraw because of land issues of some description. Rather than waste the time, and to make best use of the funds available, these six first nations have come forward.

[Niki Ashton, NDP, Churchill, MB]

Thank you.

I am wondering if you could speak in your capacity as chief about one of the barriers that has been raised with us, which is community capacity as well as the financial literacy of first nations. It is important to have processes in place to improve access to capital, but when you have underfunding of education and barriers to accessing education and training, isn't tackling those barriers also a way of providing opportunity for first nations across the country?

I am wondering if you could speak to those barriers and what we could be doing about them.

[Chief Austin Bear]

Thank you.

The Indian Act on land management and the obstacles and barriers found in that sector are complicated further, or enhanced further, by just what you mentioned.

First nations, and I'll speak of my own, need greater capacity in education and training. We have students who wish to go to university for post-secondary education. In each given year, the funding available provides for perhaps 60% of those who are post-secondary eligible and post-secondary ready.

The other part, of course, is training and employment opportunities, vocational and in the trades. There is a lack of resources and support, not only from federal opportunities and responsibilities. It is also evident in the provinces. The province is creating opportunities for first nations and aboriginal peoples.

Capacity building, good governance building, financial planning, land use planning, which is most important in the best use of land and in land creating opportunities to generate revenue—much still has to be done in those areas.

[Niki Ashton, NDP, Churchill, MB]

Thank you.

I'll quickly turn to BDC. I know we've spoken briefly about some of the challenges that northern first nations face, and I am wondering if you could speak to the barriers in some of the work that you do in that respect.

[Robert Lajoie]

Thank you for your question.

Some of the barriers obviously are geographical. We can't physically be in the north as much as we would like to, but we do have strategies in place. There are some areas in the north where we do have business centres, such as in northern B.C. and the territories. We spoke earlier about northern Manitoba, specifically, where we work with the local chambers and Community Futures. We partner with them, as that is an avenue for extending our reach through those community leaders.

[The Chair, Conservative, Blake Richards]

Thank you.

We'll move now to Mr. Barlow for the next seven minutes.

[John Barlow, Conservative, Macleod, AB]

Thank you, Mr. Chair.

Mr. Lajoie, I would like to start with you.

Thank you, everyone, for coming. I know it's a bit of a distance for some of you. I much appreciate your participation in this.

You talked about some of the clients you have with BDC. I'm not sure if I have the exact numbers but you say you have about 30,000 clients and just over 1% of those are aboriginal?

[Robert Lajoie]

Yes.

[John Barlow, Conservative, Macleod, AB]

Is there a reason why you don't have a higher number than 1%? You talk about having about 370 clients who are from aboriginal communities. Is there something stopping them from accessing the programs of BDC so that you only have that 1% of clients?

[Robert Lajoie]

Our penetration rate is lower in the aboriginal community. Part of it is creating awareness. The big shift in the recent year, or 18 months, is having a dedicated team focused on developing the awareness internally throughout our 103 business centres as well as externally with our local partners in the AFI communities as well as the charter bank communities. We started last year with four account managers and we've grown that to six account managers. In the past year we did 140 loans, so that is increasing. We saw 12% growth in our first full year of the dedicated focus team. We've also centralized our credit approval so all credit across Canada is authorized in Winnipeg with the exception of the French credit as we have a dedicated person in Quebec.

Again, this is to help us understand the needs and help us see the potential solutions that exist in other regions of the country so we can help the entrepreneurs developing in other areas and work through that. We have a consistent approach. There was 12% growth in the first full year and we're planning for more growth as the awareness is created.

[John Barlow, Conservative, Macleod, AB]

It's not that there are barriers necessarily. It's just really raising awareness and promoting that financial literacy and the actual programs that exist in those communities then.

[Robert Lajoie]

That's right.

[John Barlow, Conservative, Macleod, AB]

I liked some of the programs that you did mention such as the aboriginal business development fund, and the growth capital. I also want to touch on the E-Spirit business competition you talked about. I was involved in Junior Achievement quite a bit growing up. It sounds similar, though online didn't exist at that time.

[Robert Lajoie]

No.

[John Barlow, Conservative, Macleod, AB]

To have 6,500 youth go through that program, it sounds like you really tapped into something there. Is this a new program or is this one that's been going on for a while?

[Robert Lajoie]

The program was established in the early 2000s.

[John Barlow, Conservative, Macleod, AB]

So it's been going on for a bit.

We've all talked about improving awareness and financial literacy. Is this a program that's focused on that to basically show them this is how you build a business and this is how you develop a business plan?

Can you talk about the program a little bit.