- The biggest barrier facing the Indigenous economy is access to capital. Indigenous communities also need training strategies, infrastructure, procurement, and business supports.
- Investments and business geared toward social impact will play a significant role in closing the gaps between the Indigenous and Canadian economies.
- Institutional investors have a great role to play in developing Canada’s Indigenous economy, not only through investing in the Indigenous Growth Fund, but through syndicating projects in Indigenous communities.
Both the government and private sector need to realize that the Indigenous economy is an untapped resource. By building partnerships with Indigenous communities and businesses, there is significant opportunity for both financial gain, social impact and prosperity for all of Canada.
What is the current state of the Indigenous economy? Where do we stand on economic reconciliation and how can it impact the wider Canadian economy?
Economic reconciliation for the Indigenous community means reclaiming and a return to a state where we were priorto contact; being part of an economic ecosystem. In that pre-colonial state we had vast trade routes, farming and access to land – we considered ourselves prosperous.
There needs to be a realization that colonization brought us policies of despair that separated us from the economic ecosystem. When we were cleared for settlement and put on reserves, no one considered our resilience and ability to survive.
“NACCA will be working with other Indigenous institutions to create products, programs and infrastructure that will allow the procuring of services from Indigenous people. Once we achieve this, we will feel part of the ecosystem.”
Even today, barriers continue to put a stranglehold on Indigenous peoples’ ability to catch up. We are not part of the economy and cannot feel that we are part of Canada until the gaps are addressed. The system that was created to exclude us is still made up of white males – for example, 95% in the financial sector alone. Very few considered minorities are part of that system, let alone Indigenous people. Small efforts are being made by corporations to hire, procure and work with Indigenous communities, yet this is mostly associated with access-to-resources type projects. The government and corporations do not fully know how to engage and work with Indigenous communities. NACCA will be working with other Indigenous institutions to create products, programs and infrastructure that will allow the procuring of services from Indigenous people. Once we achieve this, we will feel part of the ecosystem.
There are more than 630 Indigenous communities in Canada and each one has its unique challenges. The majority of them are in poverty, 50% have resource potential in their territories, yet few are in a position of prosperity.
“The global investment community wants more certainty around economic development in Canada, and we can help realize this by including Indigenous communities and closing the many gaps that exist.”
Today, Canada’s prosperity is tied to Indigenous prosperity. Over the past 10 years, there has been a vast decline in major projects in Canada, and that is due in part to uncertainty. There are 275 court cases that say Indigenous communities have rights and title to their territories, and this recognition creates leverage that can lead to economic reconciliation. The trend needs to move towards equity and ownership positions in those types of major projects so that there is a real sharing of prosperity. Additionally, the global investment community wants more certainty around economic development in Canada, and we can help realize this by including Indigenous communities and closing the many gaps that exist.
What are the barriers being faced by Indigenous entrepreneurs in Canada? What would you like to see from the government to overcome these barriers?
In terms of government support for Indigenous people, we are talking about the absolute minimum consideration. Indigenous people do not have the same quality of life as other Canadians. If we combine Indigenous people into a measure of Canada’s economic standing internationally, we rank 63rd in the world for quality of life. Providing clean water as a minimum human rights standard would sound simple. To have water, a home, a toilet you can flush, healthcare you can rely on, and a school to send your children to – these are minimum standards and they are not being met in Canada’s Indigenous communities. In 2019, the government spent $17 billion on Indigenous services, yet there is still a lot of work to be done to meet minimum human right standards. Canada’s Indigenous communities need new houses with functioning water, sewage systems and basic services before our businesses can even think about development. There is still a lack of awareness of this issue. Canada must realize that Indigenous people have been placed on reserves in the far north or on settlement lands. If there was an equitability standard, these services would be provided instantly. There is more than enough capital in the world and Canada was made wealthy by our land, so we can solve this. After this is accomplished, Canada can stand up and be a good example internationally.
“There are currently many barriers and gaps in the Indigenous economy. We need education and training strategies, infrastructure, procurement, business supports and access to capital.”
There are currently many barriers and gaps in the Indigenous economy. We need education and training strategies, infrastructure, procurement, business supports and access to capital. We cannot be successful and be included in the system without access to capital. This has been our biggest need for decades. We are working on tools to engage the private sector on access to capital, but the government still needs to step up and provide stimulus to ensure that capital is deployed.
On February 26 and 27, 2020 NACCA we will host the 2nd Indigenous Prosperity Forum in Gatineau at Lac Lemay. The theme this year is “The Road Ahead – Investing in Indigenous Business.” We are connecting investors with our AFI members and members from our community, and offering a variety of panels, such as one on Indigenous agriculture – which can be one of the biggest untapped economic opportunities for our people. NACCA is well positioned to act as an intermediary between Canada’s investment community and Indigenous people. If there are investors and foundations that want to make an impact in the world, we can connect them to those projects and opportunities through our Aboriginal Financial Institution (AFI) network.
Few understand the opportunities that exist in the Indigenous market. It is up to us to change the culture within the system and connect Indigenous people to the Canadian economy. Although many barriers exist, NACCA can provide support for Indigenous entrepreneurs and show them a pathway to success through new access to capital, business support and procurement opportunities. Connecting Indigenous people with the Canadian economy is only possible if we all work together.
“Few understand the opportunities that exist in the Indigenous market. It is up to us to change the culture within the system and connect Indigenous people to the Canadian economy.”
Through all its existing gaps in Indigenous services, Canada does have some practices that would benefit Indigenous people in other countries, like the AFI network. We have the Aboriginal Financial Institutions (AFI) network, with 59 Aboriginal Financial Institutions across the country that have provided 48,000 loans and $2.7 billion in lending over the last 35 years. This is a good story and something we can share with the rest of the world. Even with this success, the network has suffered a 70% loss in financial support from the Canadian government. Even after the Royal Commission on Aboriginal Peoples (RCAP) recommended that the government increase support by 5% per year over 30 years ago.
What must corporate Canada do differently to better engage with Indigenous communities and businesses?
There is a big learning curve that needs to take place in corporate Canada. Corporate social responsibility (CSR) has been in place for about a decade, but corporations are only now seeing the writing on the wall: millennials have different expectations – they want social impact with their investment. Businesses are going to be measured on environmental, social and governance (ESG) indicators. Corporations will realize that they need to do business differently – they need to have a positive impact on their region. This mentality is growing and will become a bigger measure of success for the investment community. And this will have an impact on corporate Canada’s relations with Indigenous communities.
“Corporate Canada must create doors of inclusivity, set targets, and get Indigenous businesses to engage. Once Indigenous communities see what opportunity exists, they will respond well.”
A good example is Suncor in Alberta, where they have had a procurement policy with Indigenous communities since the 1970s. Corporations can take a few lessons from this. Corporate Canada must create doors of inclusivity, set targets, and get Indigenous businesses to engage. Once Indigenous communities see what opportunity exists, they will respond well.
Any corporation that wants to be successful and engage the community needs a senior Indigenous person to strategize with about how they will do business. They must make sure they have participation from Indigenous people early on in the planning stages. If they do so, their project is going to be that much more successful.
“Any corporation that wants to be successful and engage the community needs a senior Indigenous person to strategize with about how they will do business.”
Additionally, companies should also have an Indigenous person on their board, especially if they are involved with resource development projects. In general, the Canadian corporate ecosystem needs to become more diverse – we need women, Indigenous people, and people of colour involved so that it reflects our diverse society.
Which lending pathways are best suited for Indigenous entrepreneurs? Are these available?
Indigenous entrepreneurs need a lending pathway where they can test out their entrepreneurship career. Through micro lending, a side-hustle or part-time work, they can eventually graduate to engagement with an AFI or bank to obtain a business loan. When they demonstrate that their business is successful, they can then expand. Many partnerships are being created and grown to increase support for Canada’s Indigenous entrepreneurs. These include Futurpreneur, which we have formed a partnership with to increase its lending in this segment, and the Indigenous Tourism Association of Canada, which now offers micro lending for Indigenous tourism. Also, with the introduction of NACCA’s upcoming Indigenous Growth Fund, we will be able to expand the size of our capital base and raise private sector capital.
What role can social finance play in the Indigenous economy and how can it be measured? What can investors do to drive further reconciliation?
Over the past 10 years there has been a shift towards social impact, with investors looking for opportunities where they can make a difference. The baby boomers are transferring $41 trillion to the millennials, and 86% of millennials are looking to achieve social impact through their purchases or investments. So the financial and investment communities need to start thinking about how to respond to this demand. The Indigenous community is well positioned to demonstrate social impact, because we have so many economic gaps to fill. And there is huge opportunity for us to participate in partnerships with social impact investors, because our economy is virtually untapped.
“The Indigenous community is well positioned to demonstrate social impact, because we have so many economic gaps to fill. And there is huge opportunity for us to participate in partnerships with social impact investors, because our economy is virtually untapped.”
We will likely see that environmental, social and governance (ESG) indicators will not be the only measurement in the future standardized investment evaluation model. NACCA is going to undertake a social impact study where the metrics to measure impact are redefined, because we understand how 35 years and $2.7 billion in lending has impacted Indigenous communities in terms of their quality of life. The Indian Business Corporation (IBC), one of our AFIs, completed a social study and they found that their lending investments led to a 24% improvement in ‘health’ indicators, a 52% improvement in ‘mental health’ indicators, and a 72% improvement in ‘life satisfaction’ factors for Indigenous people. These indicators show what a dollar or a business can do for the individual. The ancillary impact throughout the community can be measured so investors see what their money is doing. They will get a return, but also be able to demonstrate and report back to their shareholders on these other benefits.
An example of how this could work is our partnership with the Share Network Canada, a network of institutional investors. From these investors, we presented a need capital with a low interest expectation. On a balanced portfolio you have anywhere between 3% and 10% expected return. For the purposes of NACCA’s network that is delivering lending, we are looking for the lower return-on-capital end of 3%, since those investments are going to provide social impact for the Indigenous community but less of a return for the investor. For our network with a loan loss rate of less than 2.2%, it’s a low risk investment. There must be a measure of that social impact so that the shareholders know they did a good thing by giving back to society. Institutional investors have a great role to play in developing Canada’s Indigenous economy, not only through investing in the Indigenous Growth Fund, but through syndicating projects in Indigenous communities. NACCA can be the intermediary that creates those connections.