Mr. Speaker, I rise today to support Bill C-91, the Business Development Bank of Canada Act. The legislation represents the next step in the evolution of an institution that has a long and honourable tradition of helping Canadian business respond to the changing demands of the economy.
Fifty-one years ago the industrial development bank was created to help wartime manufacturers convert their facilities for peacetime operations. These businesses needed special attention because it was virtually impossible for them to obtain term loans. At that time chartered banks were prohibited by the Bank Act for making loans against mortgage security.
The majority of IDB loans during its early years went to companies such as machine shops, sawmills, textile and garment factories, flour mills and auto parts manufacturers. In other words, the bank responded to the emerging industries of the day in a nation that was converting its wartime industrial capacity to new challenges.
As the nation's economy changed, so did the nature of the bank's customers. The business community began to respond to new opportunities of the post-war boom and the bank began to lend to wholesalers, retailers, restaurants and the hotel industry among others.
In the 1950s and 1960s the bank began to open branches in non-metropolitan areas of the country. This was a bold move at the time. The chartered banks followed the experiment with a great deal of interest. By the end of its second decade, the IDB had 22 branches across the country.
In 1971, the bank began to give businesses regular advice on how to run their operations efficiently. The bank became the only national organization to provide management services, such as consulting, training and planning, to small businesses.
In 1975, the Federal Business Development Bank was created as a crown corporation. Since then, businesses could no longer rely on government grants to execute their bank transactions. The new agency also decided to take up the challenge of providing risk capital to entrepreneurs. Today, the bank has offices in all provinces and territories. It employs 900 people who furnish financial as well as management services to Canadian small and medium size businesses.
Last year, the bank's share financing increased by 45 per cent, for a total of $80 million. As the years went by, the bank acquired an excellent reputation in the field of customer services. According to the most recent survey, 97 per cent of the bank's customers said that they would deal again with the bank and the same proportion of customers said that they would recommend the bank to other people.
It has become apparent that the FBDB must continue to evolve to meet the changing demands of the economy. This need to change has been widely discussed. In its report "Taking Care of Small Business", the Standing Committee on Industry recommended that the mandate of the FBDB be "refocused as a complementary lender to small and medium sized businesses and that it be authorized to use new financial instruments to fulfil its mandate".
The small business working committee emphasized that government sponsored programs should be refocused to fill financing gaps that are not now served adequately by the private sector. Among its recommendations are the following: "To enforce the FBDB's mandate to ensure that its activities are filling the financing gaps, and funding small businesses in all regions of the country including those associated with small and micro businesses requiring loans of less than $100,000, as well as addressing gaps in regional and sectoral lending and working capital requirements". The committee stated: "These objectives should be pursued on a full cost recovery basis".
The Federal Business Development Bank Act has not been amended since originally passed in 1974. It requires updating to reflect market developments such as the use of financial instruments that had not been invented in 1974. Moreover, the bank is now operating at near its statutory ceiling and financial ratios. To respond to forecasted business volume we need to act quickly to provide the legislated authority to increase the bank's equity. If the statutory lending cap is not changed soon, the bank could be forced to ration credit to businesses in the near future.
Under its proposed expanded mandate the Business Development Bank of Canada will be better positioned and equipped to address the specific needs of small business through innovative financing. It will operate where market forces fail to provide access to financing for promising business ventures.
Under its new mandate the bank will continue to be active in smaller loans and investments in its lending and venture capital programs. It will increase quasi-equity and working capital financings. It will also focus more on knowledge based firms without abandoning its traditional activities.
The Business Development Bank of Canada Act will provide the bank with the ability and resources to keep abreast of changing requirements at a time when the small business community in Canada needs the flexibility the bank can offer.