Presentation to the Economic Developers Council of Ontario February 9,

Transcription

1 National Aboriginal Capital Corporations Association Presentation to the Economic Developers Council of Ontario February 9,

2 Who is NACCA? NACCA is the representative organization for nationwide network of 50+ Aboriginal Financial Institutions (AFIs) dedicated to stimulating economic growth in First Nations, Métis & Inuit communities through developmental lending and business support AFIs have turned $356 million in government capital into almost $2.3 billion in developmental loans, recycled 8 times since 1986 or every 3.75 years and made over 41,500 loans to date In , over 1,400 loans were made that financed $108 million in developmental lending to expand Aboriginal and Canadian prosperity by contributing $3.6 to the GDP for every ($) dollar loaned or a $391 million GDP impact, supporting over 4,400 jobs National Aboriginal Capital Corporations Association SLIDE 2

3 What does NACCA do? NACCA plays a national coordinating role on behalf of its 50+ members, by advocating for Aboriginal economic development, representing the unified voice of AFIs, publishing results based reports and specialized research, fostering strategic partnerships and building AFI organizational and network capacity Delivers 5 distinct programs for its membership to advance Aboriginal business development and support the AFI network: Aboriginal Business Financing Program is designed to increase the number of viable Aboriginal businesses in Canada by offering non-repayable contributions, to a maximum of $99,000 for eligible Aboriginal entrepreneurs and $250,000 to community-owned Aboriginal businesses Aboriginal Developmental Lending Assistance (ADLA) supports AFIs with the high costs for the administration of developmental loans and associated loan losses (about 5%, FY ) Aboriginal Capacity Development Program helps builds the capacity of AFI employees and board members to deliver effective developmental services though professional and skills development Enhanced Access Fund: provides access additional loan capital in areas of the country not served by an AFI to fill a geographic gap. The Interest Rate Buy-Down (IRB) is designed to encourage additional developmental lending by offsetting the interest costs related to accessing additional capital from mainstream financial institutions National Aboriginal Capital Corporations Association SLIDE 3

4 Why does this work matter? In 2011, the employment rate amongst Aboriginal people was 9.1% below the non-aboriginal rate, and the gap widening Average annual income amongst Aboriginal people was 27.5% below of non-aboriginal people, or $11,000 a year less Percentage (%) of income coming from government transfers for Aboriginal was 36.5%, 11% worse than the rate for non-aboriginal people High school completion rate amongst Aboriginal people was 18.5% below the non-indigenous rate and the university completion rate was 15.6 % lower than the non-aboriginal population in % of the Aboriginal population was under age 25 compared with 29% for the non-aboriginal population. The median age was 28 compared with 41 for the non-aboriginal population Number of working age (25 to 64) Aboriginal people increased 21% between 2006 and 2011, compared with only 5% growth in the non-aboriginal population Aboriginal labour force is underutilized as illustrated by the significant gaps in economic indicators between Indigenous people and non-indigenous Canadians Closing this economic and employment gap could increase national GDP by $27.7 Billion or 1.5% annually National Aboriginal Capital Corporations Association SLIDE 4

5 What are the barriers to capital? Barriers vary and are complex, including community remoteness, small markets, longer supply chains, higher shipping costs, on-reserve security (Sect. 89, Indian Act), limited financial and business experience, systemic prejudice, lower personal savings and credit ratings Location is often issue, mainstream financial institutions have limited presence in remote Aboriginal communities and assets as security in remote areas often have little value National Aboriginal Capital Corporations Association SLIDE 5

6 How do AFIs address barriers? AFIs are experts in developmental lending and Aboriginal business risk assessment AFIs offer tailored financing for Aboriginal entrepreneurs that mainstream financial institutions often over look AFIs approach is to offer a flexible stance on security requirements, manage risk by building relationships and entrepreneurial capacity AFIs have deep reach and understanding of the markets and communities they serve to mitigate business risk AFIs share the same broader values as the communities they serve, that is not only limited by net-worth or a return on investment, but also social and community return AFIs have the developed the financial know-how that others in the financial sector may have not National Aboriginal Capital Corporations Association SLIDE 6

7 What are AFIs challenges to closing the capital gap? Investment in the network has not risen and the value of loans has stagnated at just over $100 million per year, since 2012 Stagnation is a combination of loan interest rates that constrains revenue generation for re-investment and accumulated loan losses over several years of 5%, which is low by developmental lending standards 22-AFIs do not have sufficient loan capital to meet six months of loan demand and this could grow to 29-AFIs in 5-years (2 of 7 Ontario AFIs have insufficient capital) Current loan shortfall needs an immediate cash investment of $83 million to be the catalyst for a $299 million GDP surge and support up to 43,000 jobs (created & maintained) National Aboriginal Capital Corporations Association SLIDE 7

8 Outlook A growing number of AFIs are seeking to grow their range of business and financial services AFIs and NACCA are developing new ways of working together to address larger corporate and community financing needs In the mid to long-term AFIs are seeking more capital to support a broad array of loans for both individual small entrepreneurs and larger, more complex loans that growing number of AFI clients now seek In addition, there is need to offer more business support services to facilitate greater growth in Aboriginal business sector with a particular focus on Aboriginal women, youth, green energy and innovation National Aboriginal Capital Corporations Association SLIDE 8

9 Sources Promise and Prosperity: 2016 Aboriginal Business Survey, Canadian Council for Aboriginal Business, September 2016 Reconciliation: Growing Canada s Economy by $27.7 Billion, National Aboriginal Economic Development Board, November 2016 Investing in the Strengths of Aboriginal Financial Institutions: Investment Prospectus, National Aboriginal Capital Corporations Association, December 2016 Impact of Developmental Finance on Aboriginal Entrepreneurship and Economic Development in Canada, Conference Board of Canada, February 2017 National Aboriginal Capital Corporations Association SLIDE 9