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Winnipeg Free Press - PRINT EDITION

Aboriginal loan agencies want fair play

By: Alan Park

Posted: 02/17/2011 1:00 AM | Comments: 0

It is not often that the CEO of one financial institution will publicly commend a competitor. But I intend to do that for Assiniboine Credit Union of Manitoba and Al Morin, the president and chief executive officer.

Last week, ACU announced it wanted no part of a federal program to provide millions in loan loss subsidies to selected banks and credit unions while discriminating against aboriginal financial institutions.

The aboriginal financial institution, of which I am CEO, Tribal Wi-Chi-Way Win Capital Corporation of Manitoba, is detrimentally affected by these subsidies. Now that ACU and TWCC have both sounded the alarm, Ottawa should be listening.

At issue is the Loan Loss Reserve initiative, announced by Indian and Northern Affairs Canada in 2009, to hand out up to $15.5 million in loan loss subsidies to encourage selected non-aboriginal lenders to lend to aboriginal businesses. Aboriginal financial institutions were deemed ineligible for this program.

ACU and TWCC are not alone in believing INAC should own up to a mistake and redesign this program to include aboriginal financial institutions. Last March 19, the National Aboriginal Economic Development Board, a federal advisory board to the Minister of Indian and Northern Affairs, recommended doing just that.

"The NAEDB advocates utilizing existing aboriginal entities whenever possible in the delivery of economic development services, as part of the federal government's overall strategy to build capacity among aboriginal people, communities and organizations,'' the board said in a letter to the minister.

"The board believes the federal government has a significant opportunity to develop the capacity of the (aboriginal financial institutions) by including them in this initiative.''

Less than two weeks earlier, the government's own aboriginal caucus gave the minister the same advice.

So ACU and TWCC are hardly isolated voices on this issue. In fact, the advisory board's letter prompts the question of why the minister has so many advisers if their advice is ignored.

Common sense should dictate that an aboriginal economic development program that snubs aboriginals cannot succeed. Exclusion of aboriginal financial institutions reflects the kind of paternalistic and assimilation-type thinking that created residential schools.

ACU, which was entitled to $2.8 million in loan loss subsidies, is pulling out of this program, quite simply, because it has been a flop.

In its first 18 months of operation ended Sept. 30, the loan loss program has generated little more than $4 million in loans to Aboriginal entrepreneurs across Canada.

In contrast, TWCC, one of the most successful aboriginal financial institutions in Canada, alone has loaned out a little more than $4 million to First Nations businesses in Manitoba in the past year.

Overall, the 57 aboriginal financial institutions in Canada loaned more than $100 million to entrepreneurs in First Nations, Métis and Inuit communities in 2009. This amounts to 1,250 loans creating more than 3,675 jobs, according to recently published figures.

Imagine what kind of growth numbers could be produced in native communities if aboriginal financial institutions like TWCC could partner with mainstream lenders like ACU to provide even more seed capital.

Yet, the aboriginal financial institutions won't be able to remain viable in the long term because they won't be able to offer borrowing rates as attractive as those at their subsidized competitors if the LLR initiative is allowed to continue.

Aboriginal financial institutions, which have loaned more than $1.4 billion to aboriginal communities in the past 20 years, have been hailed by several Indian and Northern Affairs ministers as a major success story. Indeed they are.

"This access to capital has been -- and continues to be -- critical to long-term aboriginal economic self-sufficiency,'' former minister Chuck Strahl said in a speech to the Empire Club in Toronto on May 15, 2008.

Yet, INAC has produced a program that will put the long-term success of these special financial institutions in doubt. Clearly, the LLR has been a case of one hand of government not knowing what the other was doing.

The payroll at INAC has grown to more than 5.000 employees from 3,100 in just a few short years. We should all be striving for this kind of job growth outside the department.

Alan Park is chief executive officer

of Tribal Wi-Chi-Way-Win

Capital Corporation.

Republished from the Winnipeg Free Press print edition February 17, 2011 A11

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