Investing in the Indigenous Economy’s Long-Term Success

How has the Indigenous economy been impacted by COVID-19 and how have the businesses that Aboriginal Financial Institutions (AFIs) deal with been affected specifically?

We learned early on and we knew early on that this would be an impact. Indigenous communities and Indigenous people face many barriers when we get into business, and this pandemic—that basically brought the whole country to a shutdown—affected the Indigenous community immensely.

Indigenous businesses [through a taskforce survey] told us that 92% of them were impacted by the business—the loss of revenues and they shut down their businesses outright. When we surveyed our own members, the AFI members back in March, 95% of them said that their businesses would be impacted. What we have seen is that tourism businesses basically shut down, service-related businesses had to shut down, we have the fisheries industries out in Atlantic Canada were also heavily affected.

“This pandemic—that basically brought the whole country to a shutdown—affected the Indigenous community immensely.”

A majority of our businesses have less than five people as employees, so they are real micro and small businesses; there is a large portion of them [that] are sole proprietors and the emergency program that the government announced for regular Canadians just did not meet the needs of Indigenous entrepreneurs. So that is why we put in a special request to the government to ensure that our Indigenous entrepreneurs were not missed.

“The emergency program that the government announced for regular Canadians just did not meet the needs of Indigenous entrepreneurs.”

We started early on with working with Indigenous Services Canada on a business case to ensure that there were proper supports for Indigenous businesses—and you heard about the announcement for $307 million that was announced for Indigenous people—that was what we were working on for many months.

What are some of the existing institutional barriers that Indigenous businesses regularly face and that are being exacerbated by COVID-19?

Indigenous communities and Indigenous entrepreneurs have been facing an uphill battle when they get into business. A majority of our communities are not within the market area of where regular businesses are, so we have got a proximity market problem. We do not have generational wealth like most Canadians would have, they have had access to, and our community has faced discrimination from the very beginning so that we have been prevented from accumulating generational wealth—so there is no equity within families to ensure that there is support to get them started.

“We face a lot of barriers that make it harder for an Indigenous person to get into business, and access to capital has always been the biggest barrier.”

We have health indicators that are lower, we have educational indicators that are lower. We face a lot of barriers that make it harder for an Indigenous person to get into business, and access to capital has always been the biggest barrier.

What role is the Aboriginal Financial Institution (AFI) network playing to address the access to capital gap Indigenous entrepreneurs face and how are their capital needs evolving?

Thirty-five years ago, when they started the AFI network with the Aboriginal Financial Institution, it gave an entrepreneur an option to get some capital. But it has been a couple of decades since the network has seen new capital.

“This money has not disappeared like other government money has—it is still going to work and it is still assisting the market that it was intended to assist.”

When the government first invested in this network, they provided $250 million to begin. That money has been recycled—so it is not lost—it has been recycled and used over and over again. I have said 12 times it has been utilized. So it has been giving out loans, it has been paid back and given out loans to the tune of $2.7 billion [and] 48,000 business loans have been provided. So we have been assisting more than 50,000 Indigenous businesses that are in Canada. So this is why I call it the best kept secret, because this money has not disappeared like other government money has—it is still going to work and it is still assisting the market that it was intended to assist.

But we are getting businesses that are more complex, that are larger, [and] they need bigger loans, but we have been operating with the same lending criteria for the past 30 years. It does not meet the needs of the entrepreneur in today’s day and age, when we have to grow those businesses and provide them with more money—so we still have an access to capital problem. The government announced a $100 million growth fund but that is yet to roll out and has been put on the backburner while we deal with the pandemic.

What would the AFI network achieve if it had access to more capital?

I think we could probably double the loan portfolio within our network, and that is what the loss in opportunity is: we can double the businesses. Now, the situation has changed a little bit with the pandemic, but we are going to be talking about post-pandemic and growing the economy to [what] we were on track for before the pandemic started.

How does the more than $300 million dollars the federal government committed to NACCA fit into this picture? What will it achieve?

This money, it had a simple formula, 6,000 businesses at $40,000 a business. We have more than 50,000 Indigenous businesses in Canada right now, so this is going to assist 6,000 of them which are current clients of the AFI network and some former clients of the AFI network—so it is going to protect the investment. And this is going to support that they survive throughout this pandemic and that is far as it is going to go, because it is going to operational expenses. So where they would have had revenue and paid their bills, this loan is now going to pay their bills but now they are stuck with another loan—and 40% of them said that they cannot take on new debt, so they are overleveraged as it is.

How do you assess the structure and the rollout of the government’s support package and its ability to meet Indigenous businesses need? What should the Minister of Finance know especially now that Minister Freeland is in place?

What we found is that there was a discrepancy between the program provided to the CF network at the $40,000 emergency response and the $40,000 emergency response for the Indigenous network. They were permitted to stack funding so that they can build on and provide larger loans or larger contributions to different business emergency response; they were permitted to go above and beyond the $40,000, depending on the situation; they are going to be permitted to keep their loan capital at the end of the day. So some of our network are going to be receiving capital through the CF network, but our Indigenous emergency response has to return that money back to Canada.

“40% of our entrepreneurs said they cannot take on any more debt.”

So we sent a letter saying this is not really a good situation—that there is a discrepancy between these two similar programs and we need to align them so that there is not a competing source of capital out there for the emergency response, whereas we have members right now that have to refer some of their clients to the CF network because their conditions are better than our conditions—and for the entrepreneur, it is a better situation. What we wanted to do is align that system so that we are all working from the same rulebook.

One of the last ones was 40% of our entrepreneurs said they cannot take on any more debt. They have already taken out a loan to start their business in the first place, to expand their business, and now they are being offered a loan to get through this pandemic. It is no fault of their own, but they are going to have to take on new debt. I am thinking that we need to provide them with more non-repayable and the Ontario government came up with a 50/50 program, so $25,000 loan, $25,000 non-repayable—recognizing that this is not their problem—and the government is supporting to protect that business so that it can get off its feet as soon as the pandemic is done.

As it stands now, what will happen with the $300 million plus from the federal government once the crisis has passed? What is your ideal scenario for this?

The CF network with this pandemic they are being provided with capital for the emergency response, just like the AFI network. But as a process to top up their capital, they are going to be permitted to keep their capital at the end of the day whereas our network is required to pay back the Government of Canada.

I think this is a perfect opportunity for the government to top up the capital for the needs of our AFI networks so that we can start recycling that money—because it is the best investment government has ever made.

What does economic reconciliation mean to you and what are the first steps we must take now to achieve it?

I keep on hearing about reconciliation, but I have not seen too much action from that lately. I find the word has been watered down quite a bit, and if we can just look at the definition of what is the goal that the government is trying to achieve with using reconciliation—if we are talking about ensuring that the gaps are closed and that Indigenous people have the same level of services as Canadians, then you have to have to a recognition that there are basic human rights that are not being met right now and that we have to meet those first before we can talk about what else can we do. Let us meet those requirements first.

“It is always a sales job to try to prove to the government that the Indigenous community is an actual investment.”

In the Indigenous business area, how about we support the organizations that are doing the work right now and recognize that they have been doing good work for all this time, but it is hard to engage and hard to tell the story and provide them with a business case that they can approve. It is always a sales job to try to prove to the government that the Indigenous community is an actual investment. If you can invest in the Indigenous community in business—we have a study that is going back 20 years ago that says for every $1 provided to an Indigenous business, $1.42 goes back to the treasury department. So it is an actual investment for the Canadian government and [to] reduce social spend to invest into a business. Those are old numbers, and we are going to be updating some new ones so that our social impact investors know what the value of their investment into Indigenous communities is going to be. There is no way but upside when you invest in the Indigenous community.

You mentioned social impact investors. What potential does this represent for the Indigenous economy?

We see that as an active opportunity for us. Forty-two trillion dollars is going to be transferred from the baby boomers to the millennials, and the millennials have different expectations of their money, we know this. They have expectations of environment, they expectations of social impact, they want their money to be invested into vehicles, but they want to see it return more than just a return—they want to see social good happen from their money. This is a good thing for us.

“We are actively now creating some investment opportunities for social impact investors so that they could put their money good work.”

So we are actively now creating some investment opportunities for social impact investors so that they could put their money good work, and then if we can demonstrate to them how that money is impacting the community, then I think we have a good relationship into the future starting because there are people that want to invest in the Indigenous community. They want to see return but they are going to see some good impact, and I think this is the trend and the way things are going to be going.

Now Summer 2020 has been the Summer of COVID-19, but also of Black Lives Matter. Do you see parallels between that and the demands of Canada’s Indigenous communities and businesses?

We live in a colonized world. The Black community and the Indigenous community have suffered through the same types of discrimination that have held us back.

Eighty-five percent of the financial sector is made up of white people—we might as well say it. The colonized nations, they set up the system. The system is set up to prevent people of color, people of diversity from entering into that system to make change.

“The Black community and the Indigenous community have suffered through the same types of discrimination that have held us back.”

When you have 85% to 95% of the leaders in any system making decisions, it makes it very hard for the diversity of the community to get a voice, and that is what we have seen. What we have seen with Black Lives Matter is that we are saying we are here, and we need to be part of the solution, and we need to be included. That is the beauty of the Black Lives Matter movement, is that it is shining a light on the discrimination that exists. And we have been screaming it all these years but now it is being heard.

“If we are going to get our communities into the boardrooms, into businesses, into organizations that make decisions, then we have to work together and we are going to have to push for inclusion.”

We have some of the same socioeconomic indicators of people in prison, bad health indicators, lack of generational wealth, legislation that specifically targets our communities to keep us out. So these things we share across the board and there is a recognition that we need to now start working together because if we are going to get our communities into the boardrooms, into businesses, into organizations that make decisions, then we have to work together and we are going to have to push for inclusion—and that is what I think has begun. It has become a lighting road to [shine] a light on that problem.

If you could pitch to a person or group with the power to influence the Indigenous economy, who would you pitch and what would you urge them to do?

What I would like Minister Freeland to know is that the Aboriginal Financial Institution network has existed for 35 years, processing 48,000 loans to Indigenous entrepreneurs to the tune of $2.7 billion.

The OECD and other research signifies that that is a great mechanism for the entire world for Indigenous people to build their economies. They have it in their backyard, but it has not been supported to the levels that it should be because we are missing opportunities. If we could support it fully, we would ensure that the Indigenous community in Canada is able to build a sustainable economy in the future to start supporting their peoples into the future.