INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 1, 1998

• 0912

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order. Pursuant to Standing Order 108(2), this is a study of small business access to capital and bank loans.

We are pleased to have with us today Mr. Kelly Shaughnessy, here on behalf of the Canadian Bankers Association. Mr. Shaughnessy is senior vice-president for small-business banking with the CIBC. Also here is Mr. Alan Young, vice-president of the policy division, and Mr. Ian Lightstone, director of Thompson Lightstone & Company Limited.

You can correct me if I'm wrong, but it is my understanding that the first order is for Mr. Lightstone to do the presentation based on the survey. Did you have any opening comments?

Mr. Kelly Shaughnessy (Senior Vice-President, Small Business Banking, Canadian Imperial Bank of Commerce; Canadian Bankers Association): I have a couple of moments' worth of opening remarks.

The Chair: Just so the committee members know, the survey is going to be presented first. The presentation is about half an hour to 45 minutes, and we'll then go to questions. After the questions on the survey, there is a proposal by the CBA on what we want: on whether we think the survey results are something the committee can use. They have a couple of other options they want to put forward, but I'd like to discuss the survey first.

Mr. Ianno, did you have a question?

Mr. Tony Ianno (Trinity—Spadina, Lib.): Yes.

In terms of what I spoke to Mr. Shaughnessy about on getting the reporting sped up, I understand the one circumstance that Mr. Shaughnessy explained to me, some reason for a delay. That's valid, but it would be appreciated if they could get the reporting in a little bit more on time. They can give us what they have, and if there's somebody left out, then so be it, they can be left out. Otherwise, we seem to always be further and further behind, when the intent was to have things at six months. I believe there has been a three-month delay.

The Chair: Are you talking about quarterly statistics?

Mr. Tony Ianno: Of course.

Mr. Kelly Shaughnessy: I cover that in my notes.

The Chair: I'll let Mr. Shaughnessy explain it then.

Mr. Tony Ianno: Thank you very much.

The Chair: Mr. Shaughnessy.

Mr. Kelly Shaughnessy: Thank you, Madam Chair.

Good morning. I'm Kelly Shaughnessy. Today I'm here in my capacity as chair of the CBA's independent business committee. With me are Ian Lightstone and Alan Young. Ian is with Thompson Lightstone & Company Limited. As you said, Alan is vice-president, policy, of the CBA.

• 0915

Mr. Young and I are here today representing the Canadian Bankers Association. We would like to advise the members that, as there are divergent views within the membership of the CBA on how the financial services sector should evolve, the CBA is not in a position to comment on merger-related issues or to speculate on how mergers would impact the sector.

The Chair: You heard that sigh, I'm sure.

Mr. Kelly Shaughnessy: On October 22 the banks will be here again to discuss the statistics, and we can speak with the chair and committee members about that. The CBA, however, does find itself in a position of being an industry organization, and, as you are well aware, there are divergent views.

Today we welcome the opportunity to discuss with you the results of a 1998 national small and medium-sized enterprise survey conducted by Thompson Lightstone and commissioned by the Canadian Bankers Association. This survey, which asked small and medium-sized business owners about their experiences with the banks, was developed in consultation with this committee. It has been conducted for three years now. As a national SME survey is a comprehensive and detailed study, Mr. Lightstone's presentation will provide you with an overview of the findings.

The 1998 report was released publicly on July 9. Copies of the survey were distributed to the Minister of Industry, members of this committee, and Industry Canada officials. Senators, your parliamentary colleagues, other government departments, industry associations, and academics were apprised of the survey's release.

After the discussion of the results of the survey, Mr. Young will present a proposal that was tabled with the committee on September 1. The proposal calls for redirection of our partnership efforts with this committee, from conducting research to acting on the knowledge gained from our research, as well as the research of the government in providing needed assistance to small business in Canada.

Although the banking industry will appear before this committee on October 22 to discuss the major banks' business lending statistics, I would like to begin today's session with a status update on the data reporting, as I know this is an issue of concern—and Mr. Ianno has raised this.

Since the project first commenced, the seven reporting banks have, at some point, experienced reporting difficulties that have adversely impacted our efforts to consistently provide timely statistics on a quarterly basis. I want to assure committee members that we are working to rectify these problems and to improve the timeliness of our reporting. I would like to advise the members that the data for Q1 1998 was released to the committee on September 22. On October 15 the CBA will publicly release the data for Q2 1998. As a result, we will be on schedule and on track to regular quarterly reporting.

As members may be aware, the task force on the future of the Canadian financial services sector raised in its report the issue of the national SME research and small-business data reporting. In recommendation 101 the task force calls for the collection, analysis, and publication of data on SME financing by all regulated and non-regulated providers, to be conducted by StatsCan and published on an annual basis. It also recommends that Industry Canada assume the responsibility for conducting the annual research on SMEs and the availability of financing that is currently commissioned by the CBA. We would like to inform the industry committee members that we would be open to pursuing this recommendation, and strongly support the recommendation that all providers of small-business financing be assessed.

On another update note, when we appeared before this committee on May 7 we informed members that as part of the “Building a Better Understanding” program, the CBA was about to launch a seminar series entitled “Preparing Business for the Year 2000”, in partnership with members of Parliament. In the kits we have distributed today, members will find a copy of an interim report summarizing participant feedback from 29 of the 70 seminars that have been held to date across this country. In short, the seminars have proven to be a resounding success.

Members will also find a copy of the CBA's booklet “Getting Started in Small Business”, which was released in September. We are pleased to report that in the one month since it was released, over 60,000 copies have been requested.

• 0920

I would now like to ask Mr. Lightstone to begin his presentation of the 1998 survey.

The Chair: I would like to remind committee members that Mr. Lightstone's presentation will take about 45 minutes and will go over the statistics that are contained in the Lightstone survey. After that, we'll go into questions. After the questions on the survey are finished, the CBA has another proposal on what the future should be, on whether we should continue with the survey, and what other options there are.

Mr. Ian M. Lightstone (Director, Thompson Lightstone & Company Limited): Thank you very much for the opportunity to meet with you today.

What I'd like to do is really present an overview of the key findings of our 1998 study, which we conducted on behalf of the Canadian Bankers Association. Hard copies of the fully detailed report are available, both in English and in French, and I believe there are also copies of the presentation charts here today. If you wish to follow along with me as I'm going through our presentation this morning, you can do so. Each of the pages is numbered at the bottom of the screen.

As I said, I would like to zero in on the key findings, and I am available to answer any detailed questions after the presentation. This is a very exhaustive report, a very robust study, and I'm sure there will be a number of questions that I will try to respond to and answer today.

Just to give an overview of the key objectives of this particular study for those members who have been here over the last three years in which we have conducted it, the basic mandate really of this study has been to, first, quantify the relationship that small and medium-sized businesses have with financial institutions; second, get a sense of their ease or difficulty in obtaining the financing they need to run their businesses—and indeed, if there are any difficulties, what the root causes are, as well as what the drivers are in terms of being able to obtain the financing required to operate their businesses; and, as the third component of this study that we've conducted over the past three years, really get a sense of the level of satisfaction that Canadian small and medium-sized businesses have with their financial institutions.

Just to add a couple of points in terms of the overall objectives, the study has been conducted for three years, this being the third year. There were a number of areas that were added to this current study, and I must say that a number of these areas were brought about because of discussions with the committee. I'll just point out a couple of them, because one related to the question of credit cards.

While we monitor the use of credit cards by small and medium-sized business in the country, we wanted to get a better sense of just how and why they're using these cards. We have therefore added a few questions this year to probe more deeply into the credit card issue.

Another element of interest in terms of looking at the total profile of small and medium-sized businesses is to be able to look at visible minority segments, as well as the aboriginal segments. We have a very good sizeable and representative base of visible minority business owners and managers in our study, and I will be addressing that issue. It was raised last year, and we have been able to address it.

The Chair: I just want to point out that we do have the copies of the slides in front of us. If you want to follow along, you do have the French copy in front of you, Madame Lalonde.

Mr. Ian Lightstone: And as I mentioned, if you want to follow along with me, I don't think I'll be skipping any pages. That depends on the time, of course, but they are numbered at the bottom.

Basically, as far as the study is concerned, there are three components we zero in on—and again, this methodology has been used for the three surveys. One is a very quantitative measure of small and medium-sized business owners, and this is conducted by telephone. There are really two components to this. The primary component of the study was conducted between January and March of this year. There was also another component that was conducted in the fall of 1997, zeroing in solely on Ontario and addressing the Ontario segment. Because a number of the questions from the Ontario segment were also in the national study, we've blended those two together to give us an even larger sample size. We had approximately 3,200 interviews with business owners and managers of the SME population, so we do have a very sizeable population with which we can address the issues and examine the results.

The second component of this study was conducted with account managers, and basically those account managers are with the seven major banks. Approximately 1,200 or so were asked to participate in the study, in which they kept an ongoing record of the financing requests they received, both formal and informal. Those were monitored over a period of one month, I believe. I think it was in November 1997 when we carried out that part. That produced about 4,200 actual case histories showing what happens when an individual business owner calls or comes into a branch to speak to his or her account manager and what were the results in that particular instance. So we will touch on some of that. The real details of the account manager segment are in the detailed reports.

• 0925

Then there's a third component, which we carry out basically to get a sense of and to build up our sample of recent business start-ups, where we do a random survey of individuals to see if anyone in the household has started a business in the past year. Then we roll that into the national study.

I'd like very quickly to give you a sense of the sample size we're looking at. As I said, we've conducted just over 3,200 interviews with small and medium-sized businesses. As the committee knows, the definition, which was developed by the committee, includes companies with up to $50 million in sales and with fewer than 500 employees.

While the range from $0 to $50 million worth of sales is very wide and the total sample size is 3,200, I do want to emphasize, and I think it's important for everyone to recognize, that although there is a broad sample of small and medium-sized enterprises, approximately 2,900 of these 3,200 interviews were conducted with businesses with sales of less than $5 million, and 2,300 of those interviews were conducted with businesses with sales of less than $1 million. So we do have a very sizeable and representative sample of the smaller end of the SME population. While we report on a total basis, the detailed report does look at small businesses with sales under $5 million, and there are various categories. So we do have that detail. As I mentioned, we have 4,200 account manager forms.

I'd like to provide a profile of Canadian small and medium-sized business. Our survey covers businesses in all provinces. We have a national representative sample of businesses, which we're reporting on. We cover businesses in major metro areas and in rural areas. As you will see, we also cover businesses across virtually every SIC group. So we are very confident that the study is representative of the Canadian population of small and medium-sized businesses.

I'd like to give a very brief overview of some of the key findings among the SME population. While a lot of attention is placed on business start-ups, I think it's important to recognize that the vast majority of small businesses in this country has been in business for quite some period of time. Indeed, well over half of the businesses have been in business for over ten years. Yes, it's important to look at the start-ups, but it's also important to recognize that 55% or so have been in business for a considerable period of time. So that is still there. However, what we're finding in this current study is that the average age of the companies we're speaking of is coming down. That's because there's that influx of start-ups. So we're seeing the average age of coming down, although still the vast majority has been in business for over ten years.

It's still very much a service population. While we look at manufacturing, retail, wholesale, and all the other SIC groups, the vast majority continues to be in the service sector, 39%. The other component is that while we look at a total population of up to 50 million, two-thirds of the businesses we speak to and the two-thirds we're reporting on here have sales of less than $500,000. So again, they are representing very small units of businesses operating either out of a business establishment or even out of their home. Again, that profile is coming down as a result of the influx of start-ups.

You'll notice that in terms of the importance of small and medium-sized business in the country, they average just under seven full-time employees. As you'll see in the study, about one-third actually are sole operators. So there's a good mix of those that have employees versus those that are just one-person operations.

The other interesting and important finding of this year's study is that the equity or ownership of small businesses in Canada that are held by women is on the rise. So this year we're reporting that 52% of small and medium-sized businesses are either owned fully or jointly by women. So that number is up from last year.

I won't dwell on these slides, but as you can see, just in terms of the profile of high service, we also have representation in virtually all of the other SIC groups in the country.

• 0930

Again, I point out the length of time. If you look at it in terms of over 10 years, 55% has been in business over 10 years, but the percentage for less than one year is definitely on the increase, going from 2% last year to 4% this year. So that segment of new start-ups is definitely an important one and is growing, as far as the Canadian business population is concerned.

In the last chart, looking at the annual sales, don't forget that the vast majority of businesses and the vast majority of the businesses we speak to have sales of under $1 million. Indeed, 49% have annual sales of less than $250,000. So that very small segment of the population is well represented in this study with very large and very significant bases.

I mentioned earlier that we looked at a number of special interest segments, and I just want to highlight a number of them. These groups are reported in here and we have some very significant bases. We have examined a number of these special interest segments, some of which I'll be reporting on today. That detail is in the report. It is certainly available to the committee, and we're available if you want to probe further on any questions.

I want to mention a couple of points. First, the percentage of businesses in the tourism area has increased over the past year, from 7% to 10%. In the SME population, 15% is in the exporting business, so that's a very significant percentage. There are a couple of other points to make, because we have the coverage. One in four SMEs is in a rural area, and when we define the rural areas in this study they relate to the Canada Post definition, or at least to being able to get the readings from that. So we have a significant base of rural-based companies in the sample.

Another statistic I think is important, as far as the evolving profile of small and medium-sized businesses, is that 28% of the small businesses operate out of the home. That is a very important segment and is represented in our sample to a significant level.

Mr. Walt Lastewka (St. Catharines, Lib.): The translators are having a little bit of a hard time trying to keep up.

Mr. Ian Lightstone: Do you want me to slow down?

Mr. Walt Lastewka: You might want to use fewer words and be more pointed, to give the translators a chance.

Mr. Ian Lightstone: Okay, thank you. I'll try my best.

As far as the female population is concerned, I mentioned that the percentage of women in businesses has increased over the past year—start-ups as well.

The other point I'd like to raise here is the percentage of KBI or knowledge-based industries. It's a very important sector in the Canadian population. We have asked businesses to report on whether or not they consider themselves to be knowledge-based industries. We've used the definition in a literal sense, as provided by Stats Canada. It's interesting that two-thirds of the businesses we speak to consider themselves to be knowledge-based industries.

If you relate that to the actual percentage of businesses, as defined by Stats Canada, it's only 4%, but the important thing is that business owners consider themselves to be in knowledge-based industries. That would include consultants, people who are providing educational assistance, etc. These are people who consider themselves to be in knowledge-based industries.

I'll also mention here that we looked at the segments that have businesses owned by the aboriginal population, and 3% of the businesses are owned by those in aboriginal population, and 8% are owned by individuals from visible minorities. So both of those segments are well covered in this study.

In the study we've also tried to ask business owners right at the beginning of the questions what issues, if any, they feel affect the operation of their businesses, and give them the opportunity to reply spontaneously. I think it's important to report that we get a very wide array of responses. First of all, over 90% of the respondents mentioned some sort of issue, and when we look at those issues there's a very wide array of well over 40 issues that are mentioned by respondents.

As you'll see here, taxes have come down in terms of importance, so I think that's a positive sign. We also see that the percentage that mentions obtaining financing as an issue has increased from 7% to 10%. I think it's important to recognize that this could be due to a number of reasons. It may be that the economy has improved over the previous year or two, so there is a demand for additional financing for expansion of the operation or just general financing of their business.

On the chart that indicates the issues, they were mentioned on a spontaneous basis. We do not prompt or aid them in any way. As you can see, we list them in order after asking them about the first thing that comes to mind. The primary issues, with the highest percentage, are about customer demand relating to how to sell the product and a weak economy. They are followed by the issues of the income they make and obtaining financing.

• 0935

These are the major mentions, with regard to both first mentions and total mentions. So there is quite an array of mentions that businesses voice, and obtaining financing is one of a number of items.

The key thing we look at in the study is how businesses finance their operations, and we look at it in two ways. First we ask what kind of financing they have in total to help them operate their businesses. Then we ask, on a more recent basis, what has happened over the past year in terms of any attempts they've made to finance their operations.

When we asked business owners how they finance their businesses, the vast majority relie on debt financing, 90% or so have some form of debt financing, and about 74% have some form of equity financing. We break those numbers down because I think it's very important to actually look at those particular figures to just see where this financing is coming from.

In terms of debt financing, we asked them to give us the type of debt financing they're using. As you can see, 90% of the total have some form of debt financing and 63% have some form of borrowing from either a bank or other financial institution. That's broken down both in terms of borrowing in the company name as well as borrowing from personal lines of credit that the business owner has used to finance his or her business.

The debt side is very extensive. There's a wide range of debt vehicles here that business owners use to finance their businesses, both in the formal sense of banks right through to supplier credit, leasing, etc. That's a very comprehensive and important look at the debt financing.

The other side of the scale to look at in terms of the balance sheet is equity financing. Of Canadian small and medium-sized businesses, 75% report that they use some form of equity financing to run or finance their businesses. It's important that almost half of that, or 45%, is derived from money that the business owner himself or herself has put into the business in terms of personal savings.

The other way they finance their businesses, again on a balance sheet basis, is through their retained earnings. It was a very positive sign this year that the percentage that are using retained earnings to help finance their businesses has gone from 45% to 51%. I think that's a result of the more robust economy and the higher levels of profitability reported by small businesses.

The other thing I'd like to point out here in terms of equity financing is it's important to recognize that only a very small percentage of small and medium-sized businesses actually go to or have outside investment in their businesses. If you look at investment by employees, friends, or relatives, only 9% have any investment from that side. Public equity in this case wouldn't be much of a factor. Venture capital is only 2%, and 6% use government grants, although in our detailed report it is much higher than the KBI segment.

It's important to recognize that most of the financing is coming from institutions or from funds that the business owner himself or herself puts into their business. Very little is coming from outside equity sources.

There's another important finding we've noticed this year, in terms of the financing operations of businesses. This relates to the hierarchy and how they actually finance their operations. There is a growing use of multiple sources that excludes bank financing or financial institution financing. So where it says “other sources of financing multiples”, that means they go to more than one type of provider for financing, but that 38% does not include any companies that are going to banks. It is saying that last year 32% used multiple sources that did not include bank or other financial institution financing. This year that number has grown to 38%, so they're going to a broader array of sources outside of bank or financial institution financing.

The other thing we noticed here is that a smaller percentage is using single-source financing. This is telling us that business owners are able to go to a broader array of sources for the financing of their businesses. This is a pattern we have noticed over the past year.

Credit cards is an important source, with 46% of business owners using credit cards in some way or another to help finance their businesses. There's a combination of both business credit cards and credit cards that are in their personal name. You'll notice that this year 36% use credit cards in their personal name. That number is down by 5% over last year. So the whole use of credit cards is down somewhat this past year, and it's primarily driven by less frequent use or less use of credit cards in their own name.

• 0940

The other point—and I raise this because I think it was brought up in terms of one of the earlier committee meetings we attended, I guess last year—is that somebody raised the question of whether businesses are being driven to use credit cards to finance their business. I think the answer is an absolute no, and I'll show you some more details as to why they use their credit cards.

Only 1% of the business owners indicated that credit cards are the only financial vehicle they're using to finance their business. A very small percentage, 1%, are only using credit cards, so I think that helps to refute that particular discussion. Most of the credit cards that are being issued are certainly by banks or other financial institutions.

I should also make a point—and it's brought out in the report—that recognizes also that credit cards now are not necessarily the credit cards that all of us use in terms of buying goods and services, but a number of credit card vehicles or products that are being issued now are line-of-credit types of options. So the credit card program has broadened from just a buying of services through to actually financing with a more realistic and lower interest rate.

The other comment about credit cards, just to get a sense of how they use them, is that most of the business owners we spoke to, 61%, pay off the full balance in the given month; almost 40% actually carry a balance. As you see, we have some important statistics in terms of what types of balances they are carrying. The median amount is between $1,000 and $3,000, but as you can see, 25% are less than $1,000. So it's important to recognize that while some will use it as a financing vehicle, the vast majority who use credit cards to finance their business do so on a short-term basis and pay off their debt every month.

Here is a breakdown of why they are using credit cards. Again, I think it's important that when we spoke to business owners they told us very clearly that they use credit cards as a financing vehicle out of convenience. It's convenient to have the card so that they don't have to carry cash; they can go into business operations and buy products for their businesses. So convenience is the number-one mention. The second mention is a financing one, but as I said, it's for short-term financing. So it's for a short-term period as opposed to long-term.

The third thing we're noticing is that a growing percentage of businesses are saying that they are being asked by their suppliers or clients to use credit cards in terms of either accepting purchases or paying for purchases. So that's a growing segment whose suppliers are asking them to use credit cards as a means of paying for their particular purchases.

As for the credit facilities that are being used by businesses, as you can see, 50% of businesses currently finance their company through a bank or other financial institution. So only one in two actually have any financing connection with a bank or other financial institution.

As you can see below that, there is a variety of different vehicles they are using, with operating lines of credit being the primary one: 82% of that 50%. The bracketed figures show that if we take those numbers and percentage them with the total population, 41% of all small businesses in Canada have an operating line of credit.

I'd like to move now into financing requests over the past year. What we have seen in this study is that the percentage of businesses that have gone to a bank or a financial institution has increased from 32% to 38%. So a growing number of businesses over the past year are actually going to a financial institution to request financing for their business.

Again, what we're seeing is that a vast majority do not approach a bank or a financial institution. We have tracked this question for three years. The vast majority of those people who do not go to a financial institution for financing give us a response that they themselves do not believe they have a need for financing; they do not need that additional debt financing to run their business.

So 70% of those who don't approach a financial institution tell us that the reason they don't do that is because they don't need it. They do not mention in any great numbers that either they're afraid that they'll be turned down—8%—or that they have previously been turned down—7% mentioned that. I think it's important to recognize that those who don't go do so because they believe they just don't need the money. That's on a total basis, as well as among those who deal with the major banks.

As to channels that are used, yes, the vast majority still go into their financial institution in person: 77% of those who approached a bank went into that bank branch in person. But it's important to recognize—and this is a new question we've asked—that there's a very significant percentage, 30%, who are using alternative channels such as phone, fax, and so on. We have monitored those results over the past year.

• 0945

The other comment I'd like to make as far as loan renewals is concerned is that a very significant percentage, 41%, actually received an automatic renewal. We asked them, “Did you go to a financial institution for financing over the past year”—we asked them what type of loan they made—“and, by the way, was that an automatic renewal or did you have to go through some sort of process?” Almost half of those, 41%, said it was an automatic renewal. So there is a very significant percentage who are dealing with their banks and actually just getting an automatic renewal from their account manager or from the bank itself as far as their loan renewal is concerned.

Here's the key question. We have spoken to small and medium-sized businesses for the past three years now. I think what we can report is that consistently, year after year, the loan approval rates that business owners are reporting themselves is exceedingly high. If we look at those who are dealing with the major banks, in 1996, 84% said, “When I go in and make a loan request, my loan is approved either in part or in full.” That number has increased to 87% in 1997. Now, on a reported basis, directly from the small and medium-sized business community, 93% said if they made a loan application, a request from a major bank, that loan request was granted. So it is a very high, very strong approval rating.

Just breaking that down further, there's always the question, “Well, would you go in and ask for a loan and only have it granted in part?” As you can see in terms of the chart we have here, over 80% of those loan requests—83%—as reported by the business owners themselves, was approved in all. So not only is there a very strong approval rate in total, but the vast majority of those requests are approved in their entirety.

We've looked at loan increases versus loan renewals versus new loan requests, and again, when you speak to business owners or managers in terms of the small and medium-sized community in this country—and again, I want to reiterate that the vast majority of the companies we speak to are under $1 million in sales, and indeed a very significant part of that is under $500,000 or under $250,000 in sales—regardless of the type of loan requested, those requests were approved.

You have a detailed chart on page 35 in your deck that indicates the approval rates in all of the sectors. I'll let you go through those, but I think you'll see that they are consistently strong in all sectors. Yes, they are lower in terms of those businesses that have been in business for less than a year, but still 72%, over 7 out of every 10 businesses of less than a year who go into a financial institution, have their loan request approved.

We also had a question asking people to describe themselves, whether they think they're in a start-up cycle, a fast-growth cycle, etc., and as you can see, 75% of those who consider themselves to be in a start-up mode said they had their loan approved. So again, it's consistently strong in all areas. I think it's important to recognize that loan approvals at both small and large businesses have benefited from the high approval rates.

As everyone is aware, there is a code of conduct that the banks must follow. One of the things we look at is whether or not that code of conduct is being followed or adhered to by the account managers and whether or not it's being recognized by the small business population. What we find is that about two-thirds of the account managers report that when they do have a turndown, they have provided information to that particular client. Two-thirds of the account managers report this, but only half of the business owners remember receiving that information. So there is a bit of a communications difference. Again, we have account managers reporting, as well as, on a recall basis, what the business owner is saying. I think it's important to recognize that the account managers say, “Yes, we are doing it”, but only about half of the business owners remember being told or given information.

What we're seeing is not coming through is any suggestions about alternative sources. Again, 60% of the account managers say that, but only about 4% or 5% of the SMEs recognize that. I think it's something from a communications area that probably has to be strengthened.

Another question we include in our survey is recognition of the financial ombudsman. As you can see here, about one in five customers of the major banks, 22%, are aware of the financial institution complaint-handling process. That number has increased from 17% in 1997, but stands at only one in five, and again I think that indicates a need for more communication. About one in five are only aware of the process, even though that process is in place.

• 0950

I just want to spend a couple of moments looking at reported changes in loan conditions. One of the things the committee raised two years ago is it's fine to report the percentage of loan requests that are approved, but are we having situations where people are going into their financial institution and, while they may be getting approval, the conditions surrounding that loan have become more adverse or more stringent? So we put in a number of questions relating to this, such as “Have there have been any changes in your loan status? Have there been any changes in your collateral requirements or reporting requirements, etc.?” I think the important finding here is the vast majority, usually well over 90%, say they have not noticed any changes in their reporting conditions or in their collateral requirements, etc.

The indicators of saying “no change” are very high, although we do make the comment that they have softened marginally since 1997. You'll see some of those numbers have come down one or two percentage points, which may or may not be significant given the size of the positive mode. Again, I think it's important to recognize that the vast majority of people we spoke to said, “No I have not seen any changes in my loan conditions, in my reporting requirements, or any change in my loan status.” So those are very positive indicators, as reported by the business owners.

Similarly, if we look at it in terms of reported changes in interest rates, I think it's important to recognize, in terms of the types of loans businesses are getting, that almost 60%—58%—say “I have a floating interest rate type of loan.” Then we ask them, “Has that rate gone up or down or stayed the same over the past year?” Seventy-five percent say the rate has either stayed the same or gone down, and 18% feel the rate has gone up, and that is last year and this year. Again, the vast majority, 75%, say, “I don't notice any adverse change to the interest rates that I'm receiving from my financial institution.” This is by the seven major banks.

The third major component of our study looks at satisfaction levels. We actually asked the business owners to evaluate their level of satisfaction using some 23 different criteria. These relate to rating the financial institution primarily in terms of convenience of business banking as well as on a wide range of lending attributes. We also asked them to evaluate their primary contact and to evaluate the branch staff in terms of the quality of service they're receiving or the level of satisfaction they have with the service they're receiving from their institution.

Just to help you follow the chart, we use a 10-point scale. For those who give a rating of 7, 8, 9 or 10 out of 10, that's the level of satisfaction. We consider the ratings of 5 and 6, which straddle that mid-point in the 10-point scale, to be sort of neutral or undecided. The dissatisfied ones are those who give a rating of 1 to 4 out of the 10-point scale. This is a process that we've used over the past three years.

What I can report is that the majority of business owners and managers of the SME segment are satisfied; 65% of the clients of seven major banks said “Yes, I'm satisfied with my financial institution.” That is down two percentage points, and I think we'll see some other areas where that is down. I should also mention that in terms of customer satisfaction, the scores for virtually all businesses have been declining over the past couple of years, regardless of the type of institution.

We also recently looked at some numbers in terms of what the United States have reported. Again, we see similar types of downward slides as far as overall satisfaction is concerned.

We think we're seeing a public as well as business owners that are becoming more demanding in their service requirements, and certainly those scores are declining across all segments.

If we look at it, as far as the major banks are concerned, as I said, 65% of the clients of the major banks are satisfied, and there you can look at the different levels. The one area where we do see some slippage is providing convenient business banking, and that is the one area, on an overall basis, that has declined or softened.

Borrowers of the major banks are more satisfied. I think it's important to recognize that in terms of the credit facilities, virtually 60%-plus indicate satisfaction with the credit facilities they are receiving from their major bank.

A similar analysis has been conducted on the primary contact. As you can see here, if there has been any slippage, it's been in terms of the primary contact. Again, we think it's a function of just a more demanding public. These are people who are more critical of all of the types of services they are receiving in a variety of different sectors, whether it be banking, telecommunications, transportation, etc. We are seeing slippage in a number of these sectors as it relates to the personal side or the personal contact people have with their providers.

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One of the things we wanted to see was whether there was any difference between those businesses that deal with the traditional sources versus those that use alternative means of financing. As you can see from the right-hand side of the chart, versus the left-hand, those companies who are going to alternative sources are indeed more satisfied than those who are dealing with the more traditional sources. So people who are using telephones or faxing in loan requests tend to show higher levels of satisfaction than those who don't.

Account management is one area we've monitored over the years. It's an important area of satisfaction. What we've seen is that those businesses who deal with one of the major banks are more likely to have an account manager, 65%, versus 59% for SMEs in general. That's unchanged. I won't talk about it, but some of the sectors have a higher likelihood of having an account manager, as you can see from the charts.

One of the things we've monitored is whether turnover is increasing or decreasing. What we've seen over the past year is that the level of account management turnover has moderated somewhat. Indeed, what we have is that 44% of the businesses we spoke to have had the same account manager. Those who are dealing with one of the seven major banks have had the same account manager for the past three years, and that number has increased marginally from 1997. So 40% plus have a single account manager for a three-year period.

We also asked, if they did have a turnover of an account manager, how satisfied they were with the handling of that transition. As you can see here, 52% were totally satisfied, 21% said I really had no opinion or were neutral on it, and only one in four, 23%, said they were dissatisfied with the way the transition was handled.

The other comment I'll make, and it's in the report, is that for those who do have some sort of switching or change in their account manager, it's generally only one person over the past three years. So in terms of looking at these numbers, there has been very little turnover as far as account management is concerned overall for the SME population.

On branch staff, this is a very positive part of the ratings. Indeed, as you can see here, when we look at the seven major banks, 78% of SMEs in total say they're satisfied with the overall performance of the branch staff or the branch services they're receiving. As you can see, looking at them in terms of the types of dealings, this is certainly a very positive reading as far as satisfaction with branch staff is concerned. We've seen this consistently over the three years of the study.

I have just a couple of other points before we close off.

On referrals and switching, the percentage who would recommend—and this is another sort of telltale measurement that we use—72% of the clients in the seven major banks said yes, I would recommend or refer my financial institution to another business owner. Given this high level of referrals, I think it's also important to note that 61% said they have not considered switching.

One of the things we are seeing is that there is a growing percentage of businesses, regardless of the sector, who said yes, I have given some consideration to switching. That could very well be a function that there are more and more players in the marketplace, that they have more access to different providers. Perhaps it's a broader playing field they're looking at and can use in terms of their business dealings.

I have a couple of comments about some of the different special interest segments. We have a variety of segments we've looked at in the population, but I did want to spend a few minutes looking at the KBIs, the aboriginal population, and the visible minority population in terms of just some profile information, which I won't go into in detail, and also their access to credit and their level of satisfaction. So here's a bit of profile of who the KBIs are.

As I said, only 4% report that they're a KBI to Statistics Canada, but when you actually ask businesses in total, 60% claim to be in the KBI sector. The important part in this analysis is that KBIs, as the SMEs in general, do have access to credit: 54% currently borrow from a bank or financial institution. They're equally as likely to have sought financing from one of the seven major banks as SMEs in general. Also, if you look at their approval rates, the approval rates as granted by financial institutions for KBIs is virtually identical to what we're seeing with the SME population in total. There's certainly no difference as far as the approval rates are concerned for that particular segment.

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On their satisfaction levels, it's interesting that while they're getting the same level of access to credit and the same level of approval, they're not as satisfied as business owners in general. We've looked at that and sort of wondered why. What we've seen in our reviews of other KBI sectors and studies is that they tend to be a more demanding segment. They may be more knowledgeable, as their title describes, but they also tend to be more demanding. So as you can see here, the satisfaction level at any financial institution by the KBI sector is not as strong as it is with business owners in general.

On aboriginal-based businesses, as I said, 3% report that at least one of their owners is an aboriginal, in our particular sample. There are some profiles and I think some good profile information on the types of businesses the aboriginal individuals are operating and the size of these businesses, etc. The importance of this study is whether or not they're getting access to credit, whether or not they're going to the banks, and whether or not they're getting approval.

Again, their profile mirrors the population total. They have access to credit. As with the total population, 36% actually go to a bank or financial institution or have made a request for financing this past year.

On their financing requests, indeed the sample we spoke to are actually higher. And their loan approval rate is equal to or as high as SMEs in general. So there was certainly no sense of any difference there.

In terms of satisfaction, the satisfaction scores reported by aboriginal business owners is as high as if not higher than what SMEs in total are reporting.

Looking at the same type of profile for visible minority owned businesses, our sample was able to reach 8%. And I am pleased to say that both the visible minority and the aboriginal population that we surveyed on a random basis in terms of this survey are identical or virtually equal to what Statistics Canada has reported. So we do have a good representation in terms of the visible minority owned businesses of 8%, almost one in ten of the business owners we spoke to.

I think it was good that we did this type of analysis. I think it provides some very positive information about the profile of those individuals who have opened businesses, as well as in terms of their access to credit.

Again, 50% of these businesses that are owned by visible minority individuals do use a bank or borrow from a bank or other financial institution. And like other SMEs, 38% have gone to a financial institution for borrowing this past year. And again they report very high levels of approval, 97% versus 93% in total.

So we do have a good profile of the access to credit and more importantly the approval rates for these businesses.

On satisfaction levels, if we zeroed in and drilled down on this particular group of business owners, as you can see here, the satisfaction levels are about the same: marginally down from what the SME population in total is reporting, but not substantially so. Those differences are not significant.

Just to wrap up, if I may, in terms of our summation, I think number one is that we've seen consistently over the years that the loan approval rates have increased from year to year. We started off with a level of about 86%. Those approval rates are now at 93%. So there is a very strong level of approval as far as business owners going to banks and other financial institutions.

We're also seeing a growing percentage of businesses who have approached a financial institution over the past year. They're also experiencing higher approval rates and they're receiving higher funding. So the pattern we saw for 1997 to 1998 was more business owners going for loans, more approvals, and certainly higher funding.

While we have not dwelt on it in today's presentation, all the details are in the report of our very rigorous analysis of looking at the account manager data and looking at the information that's provided to us by SMEs to see if there's any sort of discrimination across different types of business groups. I think we've seen over the past two years and we see it again in this year's analysis— And this is a very rigorous analysis, which has been examined by the academic community. We've seen it examined by a number of people in the professional sector. There's no evidence whatsoever that we're seeing any discrimination related to the demographics of that business, to the gender of the owner, to whether they're a visible minority individual, the region, the type of business or the size of business.

We will see some differences, but those are related solely to the business case that is presented by that particular organization. We look at both the account manager data and at the data provided by the SMEs, and we can assure you that there's no evidence of any systemic discrimination as far as the results are concerned.

I mentioned earlier that more small businesses are using a greater variety of debt and equity sources to finance their business operations. A very positive sign is that the use of retained earnings and the presence of retained earnings has increased dramatically from when we first started measuring businesses. It's gone from 40% up to 51%. So that's a very positive sign for a business owner to look at.

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We talked earlier about the use of multiple sources. Indeed, more small businesses are reporting that they are using multiple sources of financing, and these multiple sources exclude the use of bank or other financial institutions. So they are going to a wider field. They have more institutions, more organizations to call on. As we said, the percentage who are using single-source debt has declined over the past year.

One of the comments I'll make is that when we look at the customer satisfaction levels we do two things. One is sort of a report card to indicate the level of satisfaction. As we said, I think that level of satisfaction has remained relatively stable. But I think from sort of a diagnostic and a go-forth type of thing, we also try to look at it and ask what drives satisfaction—what are those things that help to enhance satisfaction among the small and medium-sized business community?

As you can see here, there are a number of key drivers. One is that the bank or the financial institution they're dealing with demonstrate that they have commitment to that financial institution in good and bad times. Two, they are looking for a very strong indication that their account management team or their account manager demonstrates an interest in their business, that their business is valued, and that it will be managed attentively. We see some very strong indicators there. The other aspect that we see in terms of what drives satisfaction is the request by business owners to give me convenient business banking. So we have some good tools and some good information here for the CBA members in terms of helping them to enhance the satisfaction that business owners express.

The other thing I'd like to point out, and one of the things we see really growing as far as the monitoring that we've done over the past three years, is that business owners are saying to their financial institutions and to banks that they want them to be flexible. They want them to be flexible in terms of their operations, how they deal with them, how they handle their requests, the types of things they offer them. What they're saying is they don't want a cookie-cutter approach. That word “flexibility” is one that has been emphasized time after time. They are looking for very flexible solutions and very individual types of solutions as far as their dealings with the banks.

I've probably touched on not only flexibility from a financing point of view, but flexibility in terms of helping me to run my operation more effectively. I think it's important that when you listen to the business owner, he or she is not just talking about financing, but they're also talking about a relationship that says “How do you help me run my business more effectively, more efficiently? How do you help me manage my business?” So financing is not the only issue; there are a number of other issues. That last comment I think hits home in terms of the need to be very flexible and to provide operational as well as the financing side.

I will close off there. I hope I didn't speak too quickly for the translation staff, but I wanted to keep us on time. I am available for any questions. Thank you very much.

The Chair: Thank you very much, Mr. Lightstone. We appreciate that very thorough presentation.

I'm going to remind members that we'll entertain questions for I would say probably 45 minutes or so. It depends how many questions you have on this topic. After that we do have a further presentation from the CBA and some discussion on that. If there are a lot of questions we'll go longer than 45 minutes. We have scheduled the meeting until one; however, I don't anticipate it will go past noon by any means.

That being said, I will turn to Mr. Pankiw if he has any questions.

Mr. Jim Pankiw (Saskatoon—Humboldt, Ref.): I do have questions.

To start with, on page 17, issues affecting SMEs today, 12% say it's a weak economy, 4% bureaucracy and regulations, and 3% high taxes. That total of 19% is a result of government mismanagement, plus 12% said customer demand, and 10% profit and income, which is another 22%, of which I think realistically you could argue that at least a portion of it is also a result of government mismanagement.

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If we combine those two figures, 41% of the issues identified by small and medium-sized enterprises are a result of government mismanagement, as opposed to 10% identified as obtaining financing. So it would seem to me that while banks are doing their jobs with a 90% success rate, government is doing their job with only about a 60% success rate.

Would you agree that government is clearly the primary obstacle to small and medium-sized enterprises' success in Canada?

Mr. Ian Lightstone: I don't know if I can make a comment in terms of anything relating to government mismanagement. I don't know if that's in the scope of this survey whatsoever.

Mr. Jim Pankiw: Would that not be suggested from the numbers?

Mr. Ian Lightstone: I don't know if I'd use your interpretation. What we asked people was “What are some of the issues affecting your business?” They've responded to those, and quite a large array of responses were given. They've mentioned, in terms of bureaucracy, yes, these are issues they would like addressed.

I don't know if I would necessarily go with that interpretation, but yes, it is certainly a significant component to the issues they are addressing.

Mr. Jim Pankiw: The other thing is, not only is it pretty clear, in my interpretation, anyway, but if we look at this, you're saying that you asked them to identify what they said. In other words, you didn't put these forward and ask them to rate them. Is that correct?

Mr. Ian Lightstone: That is correct. These were spontaneously mentioned.

Mr. Jim Pankiw: Why did you take that approach? I would suggest that in the mind frame of a small-business owner, when you ask him about the key issues affecting his business—for example, customer demand—sure, that would be one of the first things. But if they were to actually sit down and look at the choices, although taxes might not jump to their mind, if they actually looked at it you might find a far greater percentage identifying taxes or government bureaucracy and regulations as being the biggest issue to them.

Mr. Ian Lightstone: The purpose of this question is that we're talking about financing and access to financing.

In any well-designed survey, not only do you have a series of questions you ask them but you also want to give them an opportunity to say spontaneously, as far as they are concerned, what the issues are that affect their business. That was the purpose of this question, without any prompting whatsoever, on a spontaneous basis.

In the course of the study, and you well know, we focus very directly on financing, and we wanted to see before that, in terms of the business owner, what some of their needs were, how they run their business, and what impacts it.

In all fairness to everybody, what this is saying is there is a wide array of issues that business owners look at in terms of running their business, whether it be economy, access to credit, taxes, bureaucracy, and so on. So I think it's important to recognize that there's a wide array of issues and a need for everyone to work together to help solve some of the issues.

Mr. Jim Pankiw: I agree that the value of spontaneity is probably substantial, but do you think there would have been some value in also, as you call it, prompting, giving them the choices and seeing how that would compare to their spontaneous responses?

Mr. Ian Lightstone: Certainly. But it is not the mandate of this study to go into all these issues. There are only so many things one can ask on a survey. We take about a half an hour of a business owner's time. The mandate of the committee was to go after certain specific issues, and we thought this was one way of getting an overall sense of where things are and you could sort of anchor financing versus government bureaucracy versus the economy, and so on.

So I think it gives you a good overview, but the study wasn't really meant to get specifically into all the issues. It is something that I think is important and perhaps can be addressed at another time. This was a spot look at some of the issues, again, to get the full spectrum as opposed to just zeroing in on financing.

Mr. Jim Pankiw: So if the study were to continue, do you think areas like that would be more important than identifying— You clearly spent a significant portion of that half hour of time looking at whether there was any discrimination on demographics, gender, region, type of business, size of business and visible minority. The evidence suggests that there's nothing in any of those areas to suggest any discrimination by the major banks. Would that be an area you would exclude, then, in the future?

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Mr. Ian Lightstone: No, I wouldn't exclude it. I think that if the committee decides to go on and needs it—and it's not my call to make—it's important in terms of giving direction to monitor the needs, expectations, and level of satisfaction of business owners with regard to a variety of issues. Certainly, in this particular committee financing was one of the major issues, and that's where this study has been directed, because you want to address that and see if there were any discrimination or cause behind rejection. But I think it's important still to monitor that.

It's one of a number of issues. To answer your question, there are a variety of things business owners look at. As you can see here, it's important to be able to satisfy them on a variety of different fronts, whether it's at the government level or at the financing level, and it's your call in terms of what areas you want to look at. You would look at this, and you would also look at financing, because it has been an issue over the years.

The Chair: Mr. Shaughnessy.

Mr. Kelly Shaughnessy: You have to go back to the purpose of this survey. The survey came about as a result of the ongoing dialogue we've had with this committee over the last four years or so. The real concern of the committee over the years has been access to financing, and we thought, both as an industry association and as a committee at that point in time, that the best way to get to some of the issues of access to financing was to see it through the eyes of the beholder. So that was the whole purpose of this survey.

As Mr. Lightstone pointed out, it takes 30 minutes to run through this with a small-business person. We have to make sure that we keep to the original focus of the survey and that we don't get too much scope—

Mr. Jim Pankiw: Don't misunderstand me, I wasn't being critical of him having done it in the study. I'm just suggesting that having shown those problems aren't there, I wouldn't see the value in pursuing that any further in the future. I would sooner see it focus more on these types of issues and to try to identify more closely the real issues.

The Chair: Thank you, Mr. Pankiw.

Madam Jennings, please.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Mr. Lightstone, congratulations for the study your company has carried out. I must say that, unlike my colleague, I am very happy that you addressed the possible systemic discrimination factors, such as the fact of being part of a visible minority or being an aboriginal. I believe you included this in your report as a response to the questions I asked last year, when you presented your report, on the fact that no study had been carried out regarding visible minorities and aboriginals. I am very happy about this and I thank you very much.

First, Mr. Pankiw made a comment on the part of your study which deals with the main issues facing small and medium-sized businesses today, issues they raised spontaneously. He tries to establish a connection. He says that 4% mentioned government bureaucracy, 4% regulations, and 3% taxes, income taxes, etc. I would simply like to point out that there is no mention of which government level the respondents were referring to. I think it is very important, because we know that the three government levels have a bureaucracy and regulations regarding the industry and small businesses. So I think my colleague should study this question further.

Now here are my questions. What deviation between responses is significant in your study? When there is a deviation, what percentage is required to be significant?

[English]

Mr. Ian Lightstone: Thank you very much for your question. Excuse me for not responding in French.

[Translation]

Ms. Marlene Jennings: There is no problem. I understand English very well.

[English]

Mr. Ian Lightstone: I think it was an excellent suggestion to include those questions we had last year.

I should make a comment. We were somewhat concerned, as you know, in terms of the sensitivity of asking that type of question. We looked at it in terms of our industry requirements and standards in Canada and at what happens in the U.S., where they're much more likely to ask that type of question.

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We checked with our interviewers and we had no negative feedback in terms of asking individuals for their ethnic background or membership in certain groups. It was a very positive question that we included as part of the survey, and I'm glad we did that.

In response to your question about significance levels, significance from a statistical point of view will vary from one sample size to another, but in terms of the full detailed report, if you turn to page 16 in the English version of the full report—and I trust that both the English and French versions have the same page numbering—we provide what we call the confidence interval. If you have a sample size of 100 respondents or 500 respondents versus 1,000 or 2,000, there are the levels of statistical difference required to be significant at the 95% level. So that is there to help anybody as far as the analysis is concerned. As you know, the larger the sample component, the smaller the error range.

[Translation]

Ms. Marlene Jennings: The part of your study that deals with visible minorities says that small and medium-sized businesses with at least one owner who is a member of a visible minority tend to place friends or family more than others. This represents 16% of these small businesses compared to 9% for all small businesses. Can you explain this very significant difference?

[English]

Mr. Ian Lightstone: Unfortunately, I can't go into why that individual turns to one source versus another, the 16% versus the 9%. I think overall it's important. Unfortunately, I can't answer your question directly as to why it would be higher with that particular group versus another and what are the underlying causes or reasons for it.

I think there is a variety of reasons. I think overall, if you look at it in terms of one of the things we have seen here, it is this need for equity financing. It's a very important issue. You see that most people provide it themselves, and then there is a second tier where they go to family or friends. It's only a very small percentage who are actually using outside funding to help run their businesses, and I think that's an issue that you may want to address further on.

[Translation]

Ms. Marlene Jennings: Can you tell us why small and medium- sized businesses owned by members of visible minorities are much more likely to ask for a loan renewal rather than a new loan? According to your study, 70% of small and medium-sized businesses owned by members of visible minorities ask for a loan renewal compared to 52% of small businesses in general. Applications for new loans by members of visible minorities only represent 14% of all applications.

[English]

The Chair: One moment, Madam Jennings. We've lost the translation.

Ms. Marlene Jennings: Let me just say it in English then.

According to your study, SMEs that are visible minority owned or partially owned are much more likely to have requested a renewal of a loan, 70% versus 52% for SMEs in general, rather than a new loan, 14% for visible minority SMEs versus 29% for SMEs in general. Is there an explanation?

Mr. Ian Lightstone: It could very well be a function of new entries, new start-ups, a growing percentage of individuals of visible minorities going into business, and as such there will be a higher level of new loan requests as opposed to existing.

Ms. Marlene Jennings: Yes, but it also says renewal of a loan, 70% versus 52%. They're more likely to ask for a renewal of a loan than—

Mr. Ian Lightstone: That would mean the percentage we spoke to, the group we spoke to, had a—

Ms. Marlene Jennings: So it would actually be the inverse.

Mr. Ian Lightstone: The other way. They're more longer-standing businesses. They've had businesses in operation and they've had funding requests granted in the past and are now going into renew it.

Ms. Marlene Jennings: Right, except that, according to your study, if I'm not mistaken, SMEs that are visible minority owned or partially owned tend to have less experience and have not been in business as long as general SMEs. There appears to be some contradiction there, and I'm grappling for why that is.

Mr. Ian Lightstone: I can see that in terms of the hard numbers it could be a contradiction. In total, yes, they've been in business for fewer years, but the fact that they've been in business two years— they may have received it last year, so it's hard to correlate it.

We can look at it further. I don't have an immediate answer for you, but it could be just the fact that yes, they are younger businesses as far as the length of time they've been in operation and they did go for a loan initially and they've had those renewals. I've made a note and can look at that further.

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Ms. Marlene Jennings: Another question mark in my mind is the level of approval for loans for SMEs. For visible minorities it is 97%, while for SMEs in general it is 93%. According to the sample size, that's not really statistically relevant. However,

[Translation]

the taux d'approbation intégral—I don't know how you say that in English—for small and medium-sized businesses owned by members of visible minorities is 94%, while it is only 86% or 87% for small businesses in general. How do you explain this?

I will tell you honestly that, when I look at this, my first reaction is to say that small businesses owned by members of visible minorities or aboriginals or women do their own screening. Therefore, the quality of the owners or small businesses turning to financial institutions for financing is better from the start.

They set their own limits, which are much higher, maybe because of a perception that is not founded in reality but that we see in many other areas. Self screening is being done. Do you have an explanation or the beginning of an explanation for this? If not, do you think that my first reaction warrants further verification? Thank you.

[English]

Mr. Ian Lightstone: I don't have any explanation of why the differences may occur. There has been a variety of studies published saying that certain groups of individuals may do more or less in terms of the research they do. So there is that possibility, although this study certainly can't give you a direct answer to that, unfortunately. There's certainly a possibility there, but again, some of the differences may be because of the statistics, the sample size. There is some variance, but unfortunately I cannot give you any further elaboration on that.

[Translation]

The Chair: Thank you, Ms. Jennings.

Ms. Lalonde, please.

Ms. Francine Lalonde (Mercier, BQ): Good morning, Mr. Lightstone. I will not ask you my question this year, because you cannot give me the answer. I would like to tell you that I regret the survey is not longitudinal, asking the questions to the same businesses to evaluate the evolution of service. But you cannot decide this; it is the Canadian Bankers Association. I hope they will answer us later.

I know they are here, but I would first like to ask my question to the gentleman.

How do you build your sample? Suppose there are 10 000 businesses owned by black people. Do you select from these businesses a sample that is comparable to the one you select for other businesses, or did you select a certain number of businesses owned by members of visible minorities based on random phone calls? This is very important.

I give you another example. You say that 4% of businesses have been in operation for less than one year. Is this something you already knew? Did you arrange to ask questions to a proportion of businesses comparable to this 4%, or is there, among respondents, 4% of businesses that have been in operation for less than one year? This is extremely important, because in such surveys, it is garbage in, garbage out. We get the answers to the questions we ask, and the answers of those we ask them to.

[English]

Mr. Ian Lightstone: I think the longitudinal study is a response. Yes, it's something that is—

But I would like to make one comment. Certainly, it's a valid comment about doing a longitudinal analysis. I think the feeling is that you would finish this year, your third year, of the study so that you would have good trend comparisons that we could look at over the three years. So it was important to keep some continuity of the mandate you had set up three years ago. You now have three points in time to look at that, and then you can make a decision as to whether or not you do a longitudinal study.

• 1030

As far as your question about how we select our sample is concerned, first of all, the study is conducted on a random basis. There's a fairly detailed discussion of this in the report. We use two listings of businesses, one by CBI, which has a very extensive listing of businesses in operation. It's one that is used by most companies when they are conducting market research with small businesses in Canada. It's probably the best list we have. We also use a Dun & Bradstreet list of companies for the larger firms.

But having said that, we select these companies on a random basis. We do not have a predetermined list of companies we want to go to. We look at companies that meet the criteria of having under $50 million in sales and fewer than 500 employees. We have a screening process. We call a company and we ask to speak to the owner or the person who is most responsible for the financing decisions of the company. But we do that on a random basis. So we do have a random selection of companies by age, ethnic representation, region, etc.

So all of this is done on a random basis, although we do build it up to make sure that we have minimal sample sizes in all of the 13 SIC groups as well as in a number of other sectors. But it is a random study, and it is one that is completely representative of the population of small and medium-sized businesses in Canada.

[Translation]

Ms. Francine Lalonde: I will certainly want to know more, because a large part of the validity of the answers we have before us depends on the composition of the sample. There are also other problems.

This document you read us quickly this morning, we had not received it in advance. Therefore, I rather worked on the documents we had already received. Table A4 of Volume 2 of the report is entitled "Perceptions of Ease or Difficulty in Obtaining Financing for Small and Medium-sized Businesses in General." We can see that for one-year businesses, the level of difficulty is estimated at 63%, while overall, it is estimated at 51%, if I understand well. To me, this is an extremely important figure.

Further, on page 199, we can see under "easy/difficult" that, out of a total of 3,050 people, 812 feel it is easy, very easy, or fairly easy, and 1,540 fairly difficult. In addition, we cannot really have statistics on businesses that could not obtain financing, because financing was the condition of their establishment. Therefore, they are not there. And if it was the condition for their growth, well they are also not there.

[English]

Mr. Ian Lightstone: Thank you for the question. Just to go back, I didn't catch your closing comment about the representative sample, but I can assure you that the study is representative. It's representative of start-ups and of companies that have been in business for a significant period of time. There is no question about the representativeness of the sample. We do speak to real businesses, and we speak to them in a proper manner. It is representative of the total population. So I don't think you can question the representativeness

The question on the perception of ease or difficulty was added this year. In terms of the process they go through, we wanted to find out whether business owners find it to be an easy task or a difficult task. I think you're right, and we have reported on it in the detailed report. I think it is important to recognize that the larger percentage, 51%, of businesses think of the process as being difficult. That's not to say that they don't get funding. But the process is the same—and I don't mean to be flippant—as my owning a VCR; that is, I think the process of getting a certain channel is difficult, but I still have a VCR. So I think it's important to recognize that this is a perceptual question and that a large percentage think it's a difficult process as opposed to an easy process. I think that's something that should be addressed.

As to the fact that for the recent one-year start-ups the percentage of those that find it to be a difficult process rises to 63%, again that's a perceptual question, but there is a significant difference between them and the total population. From a communications point of view we need to know what the processes are they go through to get a loan and to point out the fact that for nine out of ten people who request a loan, the loans are approved.

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I think there's a message here from a communications point of view, to demonstrate to business owners what the process is and indeed that the vast majority of people who go in for a loan are approved. So I think it is an important finding. It's one that has been in the report, and it's important to look at it by different subgroups, whether it's new start-ups or those who have been in business for a significant period of time.

[Translation]

Ms. Francine Lalonde: I see you are looking at me. I have a problem with some of the tables. This is also true for the summary. On page 4 of your summary, it says the same thing. Therefore, it is not a question of translation. You say:

This year, a higher percentage than last year of small businesses indicated they requested financing—

You talk of 38%. You also say:

As in previous years, most small and medium-sized businesses (70%)do not think they will need to obtain financing—

This should be 62%, not 70%. I have a major problem here. What are you saying? Is it 38% or 30%?

[English]

Mr. Ian Lightstone: Both numbers are correct: 38% of the population went to a financial institution and requested financing for the past year, so 62% did not. Of that 62%, that is, those people who did not go for financing, 70% said they did not need it. As observed, most did not believe they required it and did not go for financing. The reason they didn't go is that in their mind they didn't think they needed it.

[Translation]

Ms. Francine Lalonde: In my opinion, the way to write it should be different, because it is not at all what is written here.

[English]

Mr. Ian Lightstone: I certainly understand where that confusion can be, but you're right.

[Translation]

Ms. Francine Lalonde: It is not the only place.

The Chair: Mr. Ianno, please.

[English]

Mr. Tony Ianno: Thank you very much.

I have several questions, first of all on page 17, where you have mentioned that obtaining financing is 10%, which Mr. Pankiw didn't think was sufficient and Mr. Werner thought was major the last four years that he sat in industry. He always went towards the crux of the matter affecting small business, and I, as a member of Parliament, really appreciated his approach to this committee. Has it gone up 3%? Is that what the increase of 3 means?

Mr. Ian Lightstone: Sorry, which line are you referring to?

Mr. Tony Ianno: It's “Obtaining financing”.

Mr. Ian Lightstone: It has gone up from 7% to 10%.

Mr. Tony Ianno: So that's an increase of 40%?

Mr. Ian Lightstone: If you take the 3% on the 7%, yes, that is.

Mr. Tony Ianno: So 40% of the respondents over a two-year period have indicated that this is becoming more of a concern than before.

Mr. Ian Lightstone: Yes, there is an increase in the percentage saying obtaining financing is an issue to them.

Mr. Tony Ianno: Why would that be the case, considering that the banks have indicated to us that they're trying to lend more to small business and be more sensitive to that? Yet this study, produced for the Canadian Bankers Association and paid for by the Bankers Association, shows that 40% of the respondents have indicated, more now than ever before, that obtaining finance is getting to be a major concern to them.

Mr. Ian Lightstone: I would have to question it. It's not 40% more respondents in total.

Mr. Tony Ianno: No.

Mr. Ian Lightstone: The number has increased from 7% to 10%. That's a 40% increase. It's the same thing. From 1% to 2% is a 100% increase, but it doesn't mean 100% more—

Mr. Tony Ianno: No, I understand the overall number. It's the percentage who mentioned that obtaining financing is a problem; 40% more have indicated that's a concern.

Mr. Ian Lightstone: Certainly the percentage who say it's an issue affecting their business has increased.

As I say, we have not dwelt on that question, but I think you can look at it—

Mr. Tony Ianno: You haven't dwelt on that question? Why is that, considering this is supposed to be—

The reason we did it four years ago—and Mr. Shaughnessy referred to this—-was that we were concerned about access to capital. That was the reason we've had the banks in and give us quarterly results, which at first they didn't really want to do, and then they were very kind to give it to us. They also went and did this— I don't want to call it “public relations”, but your study, which is very thorough, so that in effect they could, I believe—and Mr. Shaughnessy can address this later—ensure us that the banks are acting more responsively to small business. Yet when all of a sudden you see a major increase over two years, you don't concentrate on that. Could you explain that to me?

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Mr. Ian Lightstone: When I used the words “didn't dwell”, I meant we did not probe down on this particular question. I think we spent a significant amount of time on financing. We asked them about access, again within the mandate of what the committee asked us to do.

I think it's important to look at that number. Yes, it has gone up, but I think you can look at it two ways. One might say it's a criticism that there isn't enough financing available. I think it's also another issue of saying we have a more buoyant economy, that we have more confident businesses. These are businesses saying they could use additional funds, that they would like to be able to get more funds in order to expand, because it's not a case of keeping them afloat.

Mr. Tony Ianno: We know most banks retrench in tough times.

Mr. Ian Lightstone: I can't say that, because I don't know about that.

Mr. Tony Ianno: Well, I can tell you that members of Parliament received that for a long period of time. You may not have studied that part, but if you start with some basis as to the reasons why this was put together and why members of Parliament were concerned about access to capital, you would understand why it was a major concern. Having said that, we're trying to look at how we can get the financial institutions to be more responsive to small business. I think that's the purpose of having these hearings.

You indicated that 50% use other financial institutions or financing vehicles. I guess the question I have is whether or not you ever asked them why they have had to use other vehicles or why they have chosen to use other vehicles.

Mr. Ian Lightstone: What we do ask them—

The Vice-Chairman (Mr. Eugène Bellemare): Perhaps Mr. Shaughnessy could answer that.

Mr. Tony Ianno: We have Mr. Shaughnessy at eleven o'clock, isn't that correct? We're talking about the Lightstone study.

The Vice-Chairman (Mr. Eugène Bellemare): Based on my understanding, I don't believe there is any reason why Mr. Shaughnessy could not answer that question.

Mr. Kelly Shaughnessy: It is my understanding that at eleven o'clock Mr. Young will speak about a proposal we have for the committee, and we do talk about that.

Mr. Tony Ianno: I see.

Mr. Kelly Shaughnessy: I think we have to be very careful in asking Mr. Lightstone, who is doing the survey, to comment on industry issues. Perhaps Mr. Young or I can talk about specific industry issues.

Firstly, reference was made to the CBA's sponsorship of the survey, etc. I would have to emphasize that the CBA paid for this survey. The survey was conducted by Mr. Lightstone and his company in a highly professional manner, and I would not want you to think the CBA's sponsorship taints that.

Mr. Tony Ianno: I never questioned that.

Mr. Kelly Shaughnessy: Secondly, the question relates to financing in general, not just bank financing.

Mr. Tony Ianno: That was what my question referred to.

Mr. Kelly Shaughnessy: People are therefore expressing concern not about bank financing, but financing in general. You asked the question about why it is 50%. Why are small and medium-sized businesses turning to people other than banks and FIs for 50% of their financing?

Mr. Tony Ianno: Madam Chair, if I could interrupt for a second, I thought the point was to ask the person who did the study about why he conducted it a certain way, and why he thought it best that it should be done a certain way. I'm trying to get more of the technical side of the equation, as compared to that of the Canadian Bankers Association, whose representative has just finished saying the base of the integrity of Thompson Lightstone is that they did their own study, that they came up with the approach of how to get to it. I'm trying to deal with the technical side, as compared to Mr. Shaughnessy's and the CBA's perspective.

Since, according to Mr. Lightstone, 50% are looking for alternative sources or are using other vehicles for their financing, I'm curious as to whether or not he questioned that 50% to see why they did not use the banks. According to his study, 80% still use the banks for the purpose of obtaining operating loans. I'm just curious about what happened to that 50%. I'm not trying get into a political debate. I'm just trying to get to the technical side of the equation.

The Chair: It's my understanding, Mr. Ianno, that there was a further slide in there that talked about alternative methods that they used.

Mr. Lightstone.

Mr. Ian Lightstone: Yes, certainly.

Mr. Tony Ianno: I want to know why they chose to use that, as others have indicated in other pages of his study that 5% didn't do it because they were turned down before, or 8% or whatever the numbers were. I'm curious about the 50% who automatically went to other financial institutions. Did he ask the question as to why they went there versus the banks? I'm curious about that.

Mr. Ian Lightstone: I can certainly comment on a couple of areas. As we said, 50% said they use financial institution financing, which means 50% do not. That's a finding that we've seen consistently.

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We do ask businesses whether they go to alternative sources. What we have found year after year is that a very small percentage actually make an effort to go to some alternative source. If you look at page 72 of our detailed report, I think the number indicates that only about 16% or so actually approach an alternative source for financing. Remember, though, that these are people who actually have gone for financing. There are 50% who don't. We have found consistently that those who just don't think they need to go to a bank, a caisse populaire, a credit union, or whatever the case may be, don't think they need financing in general. That's really where the bulk of those people are.

Mr. Tony Ianno: So what you're basically saying is that it's not that the 50% are asking for alternative financing sources, it's that they're just not asking for financing period.

Mr. Ian Lightstone: That's correct. They're not going to a financial institution for financing.

Mr. Tony Ianno: So did I misread it somewhere? Can you show the part that says the other 50% use alternative sources?

Mr. Ian Lightstone: I don't know where you picked up that they say they use alternative sources. I don't recall where I say that.

Mr. Tony Ianno: The stat that's always put out is that banks only supply 50% of the borrowing needs of small businesses. In other words, out of the 100% that need to borrow, 50% go to banks and the other 50% go somewhere else.

Mr. Ian Lightstone: Or don't go anywhere.

Mr. Tony Ianno: No, out of the 100% that have borrowing needs and do go somewhere, 50% go to banks. Why is it that the other 50% do not go to banks? I'm wondering if you've answered that.

Mr. Ian Lightstone: That may be a statistic Mr. Shaughnessy can speak about, because it's a number that I believe is published by the CBA.

Mr. Tony Ianno: But you don't study that; you don't ask that question.

Mr. Ian Lightstone: Well, you're asking a series of questions here, and I can try to answer each one.

You asked me something in terms of whether or not they go. We'd ask what percentage borrows from a bank, period. It's 50%, so 50% does not. In the other part, you're asking about 50% of all lending being provided by the banks. I believe that is a CBA response, so I'll leave that one for a second.

Mr. Tony Ianno: That's fair.

The Chair: But just to clarify, Mr. Lightstone, my understanding is that the clientele for this comes from a list from somewhere.

Mr. Ian Lightstone: It comes from a full listing of businesses in Canada, that's correct.

The Chair: Whether or not they have any affiliation with any financial institution.

Mr. Ian Lightstone: That's correct. The caisse populaire is very strong in Quebec. You have credit unions. There a number of different trust companies, etc. There are a variety of other suppliers or providers, and then there are people who do not use any financial institution whatsoever.

Just to go back to your comment about alternative sources, we do address them in terms of asking these people if they went to an alternative source if they didn't go to a financial institution. A very limited number do that. Even with the low percentage of people who have had turn-downs, very few go to alternative sources. From the communications, I think that's also an important thing that says there are sources. That issue is covered in the study, and I think it is reported fairly in the study. It's a finding saying that not that many Canadians do think of other alternative sources.

The Chair: I'm sorry, but when you say “financial institution”, how do you define that? I just want to make sure we're on the same wavelength.

Mr. Ian Lightstone: There's a list that's out. We call a financial institution a bank or other financial institution, such as a caisse populaire, a credit union, the Government of Alberta treasury branch, trust companies, etc. We use a very broad list in defining that term, so that they do not think solely of banks, because banks are not the only players in this.

Mr. Tony Ianno: In other words, of the 100% of all small-business borrowers, there is no number stated here to tell us what percentage actually borrows from financial institutions like banks. You don't have that in here, right?

Mr. Ian Lightstone: Yes, it is reported. In the report we break it down by institution.

Mr. Tony Ianno: What page is it on?

Mr. Ian Lightstone: I think it's a case of where they go, so please bear with me in terms of looking at our table of contents. I'm going to be referring to the fully detailed report, not my presentation document.

Mr. Tony Ianno: I only have this one here in front of me.

Mr. Ian Lightstone: If you look at page 54 of the major report, of the detailed report—

The Chair: You identify 1,025 dealing with the seven major banks in your sample. Does that give us a percentage of how many—

Mr. Ian Lightstone: On page 55, figure 24 indicates which financial institutions they approached, so we do ask them about that, and we have detailed records in the study.

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Madam Chair, which page in the detailed report were you referring to?

The Chair: In the detailed one, at figure 44, it talks about satisfaction. You identify the sample size as 1,025.

Mr. Ian Lightstone: That's how many deal with one of the seven major banks and perhaps do some borrowing.

As for Mr. Ianno's question, if you look at figure 24, I think it will give you a sense of just where the distribution is. Sixty-seven percent—

Mr. Tony Ianno: So 67% is the number.

Mr. Ian Lightstone: Yes, it's a percentage of people who approach the financial institution. But be careful, because it does not include figures on a volume basis. If you and I go for different loans, I don't know that 50% as a dollar value. This is a percentage of companies, of businesses.

Mr. Tony Ianno: From those that responded.

Mr. Ian Lightstone: Yes, those who responded in terms of the survey, and those who said they have approached their financial institutions for financing. Here is a complete listing, and there's a more detailed appendix.

Mr. Tony Ianno: This is my last one, and then I will stop.

There is nothing in here that states that for those who have borrowing needs, 50% go to banks and 50% use alternative methods. Is that correct according to your study? That is not there.

Mr. Ian Lightstone: I don't know how you equate your 50%, Mr. Ianno.

Mr. Tony Ianno: That's fine, but it's not here.

Thank you.

The Chair: Mr. Shaughnessy, do you have a comment?

Mr. Kelly Shaughnessy: For the committee members and for Mr. Ianno, perhaps we can give some clarity to the 50% number. Firstly, we have to keep in mind that there are multiple mentions here. Very few companies today go to a single source of financing. They can get leasing financing. Leasing, for instance, is 28%, as you can see on page 20.

The 50% number that Mr. Ianno is referring to is the number of total outstandings, not those dealing uniquely with one institution. The latest survey with that number was a Conference Board study done in the fall of 1997. What it indicated was that of the total outstandings, 50% were with the major banks, but 50% were with other lenders. The most aggressive increase from their previous study was with the leasing companies, the providers such as the Newcourts or the GE Capitals. Their market share in the field increased by almost 100%, as I recall. It was between 80% and 90%.

Mr. Tony Ianno: And they went up to 15% of the overall market.

Mr. Kelly Shaughnessy: That's right.

What that indicates to me, and certainly to the organization I represent—and I've said this to the committee before—is the competitiveness and the nature of vendor financing, more and more. As an example that I've also used before, take somebody like a small-business person or even one of the members of the committee who goes in to buy a computer today. Before his or her banker even knows they've bought the computer, they'll have an offer of financing from a vendor financing source, such as a Newcourt or people like that.

So it's the competitive nature. The banks do provide 50%, but we're seeing our market share attacked on a daily basis by other highly aggressive providers of leasing and term financing.

Mr. Tony Ianno: But in that same Conference Board study you went from 48% to 50%, right?

Mr. Kelly Shaughnessy: Of the total outstanding.

Mr. Tony Ianno: Thank you.

The Chair: Mr. Solomon.

Mr. John Solomon (Regina—Lumsden—Lake Centre, NDP): Thank you very much, and I apologize for not being here earlier.

I did have a question concerning page 17 and the obtaining financing figure of 10%. In their recent survey the Canadian Federation of Independent Business indicated that 27% of its membership believed availability of financing was a significant problem. I'm wondering how you would square your figures of 10% with the CFIB numbers of 27%.

Mr. Ian Lightstone: I don't have the actual wording of their questions, so it could be a question difference. I think it's important to recognize that we asked, on a very spontaneous basis, what the issues are that affect their businesses. They gave us spontaneous responses, so that's one thing. In order to reconcile the 10% versus the 27%, then, we'd have to look at the question, first of all: how it was posed, and what the emphasis was on.

The other thing is that you're talking about a self-interest group of only 90,000 members. We're talking about a group that cuts across the full representation of the Canadian business population. Their selection of members may not be representative of the population. I think they're skewed to certain regions and that type of thing. So this is a more representative look.

The Chair: Mr. Shaughnessy, do you wish to comment on that?

Mr. Kelly Shaughnessy: To assist the honourable member, as Mr. Lightstone pointed out, in the case of the Thompson Lightstone survey, it's spontaneous. You're not prompted to answer something.

Mr. John Solomon: CFIB does prompt.

Mr. Kelly Shaughnessy: Yes, with CFIB they're given a choice of ten issues to identify. There is a prompt there, so it has to rank up there in the top ten, and that sort of thing.

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Mr. John Solomon: Just to follow up on that, when you cold-call small businesses they obviously have other things on their minds and aren't thinking about the issues pertaining to their businesses. So from your research background, would you think the cold call gets to the nub of the issues more effectively than having an option of 10 or 12 choices from which they can choose?

Mr. Ian Lightstone: When you say it's a cold call, we contact the business randomly and give them a brief introduction of the study. If it's not a convenient time we will make a call back. So all those things are taken into consideration. We start with a series of screening questions.

I think both types of questions have value, depending upon what the objectives are. Here we wanted to spontaneously get the issues that came to mind. That's one one way of looking at it. There's another case where you give a battery of statements, and we use those types of questions in a variety of different studies where you want to get each one. We do the same thing in the customer satisfaction measurements. We actually give these indications. Whether one is right or not, I don't think there's an answer to that. It's more a case of what your objectives are.

We wanted to see, on a spontaneous, unprompted basis, what a business owner thinks are the various issues, just to get an overall look. Then we zeroed in on financing as part of this study. Whether one is right or more valid than the other, I don't think you have an answer for that. When you have a prompted list you get higher mentions for everything. You get “Oh, that's something, yes, I'll mention that”. You get higher responses for all ten of the items. I believe if you look at the results you will see higher mentions for everything, as opposed to the spontaneous.

Mr. John Solomon: Okay, thank you.

Regarding the 28% you interviewed that was home-based, is that a reflection of all of the businesses out there? Are 28% of all the small businesses registered in this country home-based? Is that an accurate statement?

Mr. Ian Lightstone: A number of statistics are bandied around in this discussion. I've heard 28% and 35%. There's a very large percentage, so we think it's reflective. I believe Stats Canada has published something. A lot of other surveys have been published, and the number of about one-third of businesses being home-based is correct.

The Chair: Mr. Murray.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks, Madam Chairman.

Perhaps my question should be addressed to Mr. Shaughnessy. On page 32 of Mr. Lightstone's presentation, we're talking about final loan approval rates. The increase from 1996 to 1998 from 84% to 93% seems very significant; it's a fairly large increase. I wonder if that was a case of the banks becoming more risk-tolerant perhaps, or the applicants being better prepared when they applied, or whether just the general economic climate has led to that. Do you have any thoughts on that?

Mr. Kelly Shaughnessy: First, when we looked at the direction of these numbers, we were pleasantly surprised with the loan approval rates. I think the direction of the numbers is supported by other surveys. The CFIB, which is mentioned, is a different methodology, but directionally it's showing the same trend.

I think it is an indication of the sustained controlled growth we've had in the economy of the country over the last number of years, as opposed to explosive growth. Businesses are doing well, or certainly better today. An awful lot of small-business people also remember what happened in the last recessionary period, so they're trying to build up a little more equity and keep their leverage down, relative to what it was in previous periods.

Mr. Ian Murray: Mr. Lightstone's study indicated there's a growing awareness of the role of the ombudsman in the financial institutions, but it's growing slowly. Again I guess this is a question more for the banks than for Mr. Lightstone, but do you have any sense that the ombudsmen have had an impact on the number of approvals? Has it gone up partly because of the ombudsmen's intervention?

Mr. Kelly Shaughnessy: First, the number of people who are aware of the complaint resolution process is over 20% now. It probably isn't where it should be, but it is building over time and we're reasonably satisfied with that.

• 1100

The British ombudsman is an example that is used frequently. That's at 46%, and it has been in place for quite a few years.

Has the ombudsman had an impact? I can't talk for all the banks; I can't talk for the industry, but I can talk, if you permit just briefly, about the case of the bank I am employed by. I think it's had a positive impact. Our ombudsman not only deals with individual complaints, but he also shares with the bankers why people are complaining, why people are bringing things to him, and I'm positive that's the same at all the banks. So people learn by example, and that may well be one of the reasons awareness is going up, and it may well be a reason—I doubt if it's a material reason—on loan approval rates.

Mr. Alan Young (Vice-President, Policy Division, Canadian Bankers Association): If I can just add to that, the fact is that the Canadian ombudsman's office has made a number of recommendations over the past two years it's been in place in favour of the bank customer and has recommended that the bank take action in favour of the customer. In every single case to date in the two-year period, the bank in question has followed the Canadian ombudsman's recommendation. So I think the ombudsman process has had a beneficial effect.

If I can say just one more thing with respect to the awareness of the ombudsman's office, the report of the task force on the future of the Canadian financial services sector, the MacKay task force report, was released by the government two weeks ago. The MacKay task force did a public opinion survey, and one of the questions they asked was awareness of the consumer redress system the banks have in place. The survey found—and this wasn't just small business, it was the Canadian population in general—that 39% of Canadians who were surveyed had some awareness of the ombudsman's process. I think that's a significant size, and it compares quite favourably.

The ombudsman's office has been in place for two years in Canada. In the U.K., the ombudsman Mr. Shaughnessy spoke about has about a 46% public awareness, and that ombudsman's office has been in place for 12 years.

So yes, it could improve, but it has improved over the years.

Mr. Ian Murray: I have a final quick question.

On page 29 of the presentation, channels used to submit requests, I was struck by the fact that in Metro Toronto in particular, I guess, SMEs are active users of alternative channels—48%. In other words, as I understand this, it means that in Metro Toronto, 48% of SMEs approaching financial institutions would not be showing up in person. They'd be phoning, faxing, e-mailing, whatever. It appears to me a strange way to go to an institution and apply for financing—not to have to show up in person, but just to be able to pick up the phone, particularly if it's your first time dealing with the institution. Is there a trend here that's growing, that there's less face-to-face contact with small business owners when they're applying for financing?

Mr. Kelly Shaughnessy: I think I can answer on behalf of the industry, unless Mr. Lightstone knows of some statistical reason for it.

What you are finding, Mr. Murray, is an increasing utilization of simplified products for small business to get access to credit. So there are score-based applications and things of this nature, and an awful lot of these can be done without having to walk into an actual branch of a bank. They can be done electronically. They can be done by fax—I believe this survey includes fax—and other means.

I suspect you will see that growing. The competition is there. People talk about Wells Fargo and things of that nature—

Mr. Ian Murray: I don't mean to interrupt, but does that mean the individual account manager then has less involvement? Is it more a computer form you fill out and you either accept it or reject it? You don't have that judgment that would normally be there.

Mr. Kelly Shaughnessy: Where you'll see the use of these products increase is at the lower end. So the various banks have different sizes of loans, but they literally range from as low as $2,000, shall we say, for overdraft protection to up to $100,000. These are the types of people who in the past have probably been complaining to a degree that they're having trouble getting access to capital, and through the use of these simplified products they're getting more and more access, number one, and they're seeing far more competition than other suppliers of credit.

• 1105

Mr. Ian Murray: Thank you.

The Chair: It would be my suggestion that we break for about five minutes. I still have a number of questioners on my list for Mr. Lightstone, so we'll take a five-minute break, if that's okay.

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• 1110

The Chair: I'm going to call the meeting back to order. I still have four people who wish to ask questions: Mr. Pankiw, Mr. Lastewka, Madame Lalonde, and Mr. Shepherd. That being said, since Mr. Pankiw is not in the room at this moment, I will go to Madame Lalonde.

[Translation]

Ms. Lalonde, do you have another question?

Ms. Francine Lalonde: I need to understand, Mr. Lightstone. I took your summary and the answers you gave me earlier. You say on page 4 that a greater percentage of small and medium-sized businesses requested financing from a financial institution, that is 38%, which implies that 62% did not do so. You told me that the 70% was 70% of the 62% that do not feel they need to request financing from a financial institution.

Therefore, on page 3, when you say that the number of small and medium-sized businesses that sought multiple sources of financing, excluding banks and other financial institutions, has increased, you are not saying that it increased by 38%, but I suppose we must understand that it increased to 38%. If it had increased by 38%, we would be at 41%. Therefore, it must have increased at 38% compared to 25% in 1996.

So we have two pictures. It is as if, on the one hand, small businesses borrowed less from financial institutions, and on the other hand, we say that they borrow more from financial institutions. Could you clarify this for me.

[English]

Mr. Ian Lightstone: I will try. I agree it is a difficult one when you look at the different numbers we have here.

First of all, we start from an overall picture of asking “Do you use financial institutions for financing?” So there is one saying, yes, they go to a bank, a caisse populaire, or a trust company in general and they deal with them. They may have a loan in place. That's where that initial 50% say “Yes, I use a financial institution.” That's in general.

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The 38% you're referring to is in response to the question, “During the last year did you approach a financial institution requesting financing?” So there's one set of numbers that refers to the statement that in general I do have relationships with various institutions, and that's in the earlier part of the report on how businesses finance their operations. That's on a sort of macro basis.

On page 4 of our report we then zero in on that 38% you're referring to, those who say yes, in the past year they went to a financial institution. They very much could be part of the 50%. They may not be part of the 50% because it may be a person who previously has not dealt with somebody. So we have to be careful how we reconcile those two numbers. In the past year 38% went to a bank or a financial institution. As I said earlier, of those who did not do that in that particular year, the reason was because they didn't feel they needed financing at that time.

I didn't hear the last part where you said there was some confusion.

Mr. Kelly Shaughnessy: Madam Chair, perhaps we can look at it from a personal point of view. If a person wishes to buy a house, they will approach a financial institution for a mortgage. They may have done that last year or the year before, but next year they won't approach the bank for a mortgage because they already have it. It's the same thing with small business. They may approach a bank this year for a term loan. That term loan will be outstanding next year, so that company will still be dealing with the bank. However, they will not approach the bank next year in order to get that loan. So there are two different activities involved.

[Translation]

Ms. Francine Lalonde: In fact, we need to know if banks' activities with small and medium-sized businesses is increasing or decreasing. You will suggest not to carry out any more surveys, but I would suggest that I would like to have surveys that reflect more clearly what is going on. In the end, there is a lot of confusion in this, at least for me.

[English]

Mr. Kelly Shaughnessy: As to whether the banks are increasing their assistance to SMEs, we are. It is borne out in the statistics, and we'll be here on October 22 to discuss those statistics with you. I think those statistics will show a steady growth of assistance at all levels to small and medium-sized businesses in Canada.

Mr. Ian Lightstone: I would like to add that in terms of the report, yes, we're seeing an increase in the number of businesses that approached banks in the past year. That has gone up significantly. But at the same time the total pie has gotten bigger. There are more choices for them, and they are making multiple choices.

On page 39 we talk about the fact that there's a growing use of sources other than banks and that there are multiple sources, and that pie is getting bigger. But at the same time the percentage who approached banks in the past year has also increased significantly. So both facts are correct. They may have a smaller percentage of the total pie because the pie is growing and because of the level of competition and of the choices that are available to them, but at the same time a higher percentage went to a bank for financing this year than did last year.

[Translation]

Ms. Francine Lalonde: What I am concerned about is small and medium-sized businesses. The pie represents the banks' market shares. That is not what I am interested in. Can we say that small and medium-sized businesses have more services and go more to banks, or that the number of small businesses that borrow from multiple sources, excluding banks and other financial institutions, has increased? This is what is difficult to reconcile with the other statement.

[English]

Mr. Ian Lightstone: The answer to your first question is yes, a larger percentage went to banks this year. I can't comment on the other services because we're dealing with financing. So the answer to that question is yes, a larger percentage approached banks for financing.

You also commented that a larger percentage is choosing from multiple sources other than financial institutions, such as personal sources and family sources. Both answers are correct, and they don't necessarily have to reconcile because—

[Translation]

Ms. Francine Lalonde: Let me ask a last question. We talk of 38% of businesses, compared to 25%, that do not borrow from banks and financial institutions. Could we know if it is because it is more difficult for them? Since 1996, it is a major increase. There has been an increase from 25% to 38%. We can say that it is at least 25% more.

[English]

Mr. Ian Lightstone: When you say 25% to 38%, which point are you referring to? Bear with me.

[Translation]

Ms. Francine Lalonde: In 1996, 25% of businesses excluded borrowing from a bank. It is 38% in 1998. It is on page 3, in bold.

[English]

Mr. Kelly Shaughnessy: I think can address Madam Lalonde from the point of view of the industry, and it's related to my response to Mr. Ianno earlier.

What we're seeing in the industry is intense competition, and that competition has grown by multiples over the last three to four years. I've cited people like Newcourt and GE Capital, and there's a whole host of them coming into the market. Just this last week, Comerica, a bank from Michigan, announced that it's coming in. We're seeing more and more entries.

It's not that the banks are not lending more to small and medium-sized businesses. We are. They are coaching us more and our numbers are going up. But we're facing intense competition in the market, especially for term-type financing of vehicles.

Mr. Alan Young: If I could add, as well, we acknowledge and we've said for the last couple of years that by our appearances and our presence here you're really learning only part of the story. There is another whole half of the marketplace of debt providers and equity providers that you're not learning about.

This was an issue the task force on the future of the Canadian financial services sector studied very closely. The task force was in place for close to two years, and as you may know, they reported about two weeks ago. The task force found that the policy-makers do not have the full picture. They have 124 recommendations, but one is that Industry Canada and Statistics Canada collect data from all providers, whether they're financial institutions or non-financial institutions, and provide that data to Statistics Canada and Industry Canada so that people who are making policy with respect to the small and medium-sized business community in Canada will have a full set of data on which policy can be made.

So we share your frustration in terms of only being able to talk about part of the story.

[Translation]

Ms. Francine Lalonde: May I ask a last small question about the Ombudsman? You say somewhere that most account managers provide their clients with the information required by the code but that less than half the small businesses that were refused remember having received it.

This, too, is difficult to reconcile. Why should we believe account managers more than small businesses?

[English]

Mr. Ian Lightstone: It's not a question of which one to believe. Some 60% of account managers said we gave them information in terms of the reasons why they were turned down. It's not surprising, from a recall point of view, that only 44% said they remember being told the reasons.

What's the reason for that, whether you believe one or the other? I think it's important that two-thirds say they're doing it. Only half of the public who have been impacted that way say they recall being told that. Again, there needs to be more communication, no doubt. There's a gap there. Is it a real gap? Is it a perceived gap? We can't tell you that, but it's an important finding in itself to say this is what the account managers are doing and this is what the SME or the business owner believes is happening. About 44% said they were given information, but it should be higher. I think that's a communications issue.

The Chair: Thank you.

Mr. Kelly Shaughnessy: We are concerned about that gap too, and are doing everything we can as individual banks. The CBA is also preparing material to make sure the small and medium-sized businesses are aware of the alternate sources of capital. We are as concerned as Madam Lalonde about that.

The Chair: Thank you.

Mr. Lastewka.

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Mr. Walt Lastewka: Thank you very much, Madam Chair.

We started our discussions by looking at chapter 17 and trying to manipulate some of the numbers, but I was pleased to see that the first thing that's not on SMEs' minds is the reduction of taxes, or taxes, and that number has continued to go down.

The areas of customer demand, customer delivery, and expansion and growth continue to be in the high numbers. Mr. Shaughnessy mentioned earlier about the economy being buoyant for a longer period as a result of more confidence among the SMEs. But that pointed to the obtaining finances item, and I'm a little bit disappointed that we didn't get deeper into that area. I hope Mr. Young's presentation will address that later on. But I continue to hear more about SMEs having difficulty obtaining finances, and it would have been good to have that one bar dealt with a little deeper.

My question relates to obtaining finances. On page 23 it shows that 30% are using the bank cards and have ongoing balances in excess of $3,000. To me that says they either haven't had the proper information to get a loan, are using that because they don't want to go through the hassle of getting a loan, or don't know how to get a loan. Do you have any more information on that? The percentage of those who sometimes carry a balance is 39%, and 30% said it's over $3,000, so it starts to become substantial in ongoing interest charges.

Mr. Ian Lightstone: I don't know if you're saying it's the result of a lack of understanding or a lack of communications. I don't think we can infer that from this information. It is saying, first of all, that we know a significant portion of businesses use credit cards to operate their businesses, the vast majority use them because of convenience. We also know that the largest percentage, at 61%, pay off their balances. There is that 39% who say they carry balances for some period of time.

But if you go on to the next page, page 24, perhaps a more logical answer is that they perhaps go out and buy a piece of farm equipment or a major piece of computer equipment and it's a significant number of dollars. They may carry it for two or three months. If you look on page 24, 27% say they use credit cards for financing, but almost half of them say it's for short-term financing. So the business owner may decide to carry that balance and pay it off over a three-month period, as opposed to perhaps taking out a term loan, or whatever type of loan it is.

We have seen here that they consistently use them for their perceived benefit, as opposed to there being any sort of implication that they are forced to go in that direction, or can't find alternative sources. There's nothing in this study to show that they're using credit cards because they cannot find alternative sources. They're using them because they feel, in their minds, it's the best choice, whether it be for convenience, short-term financing, or because their supplier asked them to put it on a credit card.

Mr. Walt Lastewka: Madam Chair, I have a number of other questions, but is there a time limit? We're at 11.30, and I understand we will be hearing another report and we won't have time. Some of us must leave at one.

The Chair: At one? There is a short presentation to follow from the CBA on the future of the Lightstone survey and other options that are available. But if you have any particular questions I would be happy to entertain them for another few minutes.

Mr. Walt Lastewka: I am concerned when Mr. Shaughnessy says there are more and more entries, and I hear that all the time now. Sometimes there are more and more entries because the field is not being serviced. There are different ways of looking at it.

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On page 47, “Provides convenient business banking” went down five points. What explanation did you get for that? What would you say?

Mr. Ian Lightstone: What is the question?

Mr. Walt Lastewka: On page 47, my concern was about—

Mr. Ian Lightstone: Was it the decline in terms of providing convenient banking?

Mr. Walt Lastewka: Yes.

Mr. Ian Lightstone: We did not ask a follow-up question for why they figured this.

I think you can say that we are looking at a more time-pressed business owner, in general. Life is a lot more hectic, and we're seeing that response in a variety of different studies we're doing.

So I think it's a more demanding business owner, in general, whether it be their telecommunications, or their banking, or their dealings with government. They are becoming more demanding, and when you look at some of the major markets, time-pressed, and so on, that's what's causing it.

Mr. Walt Lastewka: As a committee, we continue to hear from the independent business federation that access to capital is continuously an item. What you're telling us is a different picture. There's something missing between those two reports. Or maybe I'm misunderstanding you.

Mr. Ian Lightstone: I think, first, we are talking about a representative sample of business owners. These are not business owners who have been approached because of a membership in CFIB. Remember, CFIB represents only 90,000 businesses. There are a million-plus businesses that have made a decision not to become members of the CFIB.

So I think you have to look at them as two different things: that's a self-interest group; this is a representative sample of business owners, in general. When you say they're not concerned about financing, they may be concerned about financing but what they've told us is that access to credit is not an issue, because 93% this year and 86% in 1996 said yes, they had their loan approved.

So what they're saying in absolute terms is that access to financing is not the most critical issue. They've told us that in a number of ways: one, from the point of view of the approval rates they're seeing; and two, when they're asked what the issues are, they're saying it's one of a number of issues that reflect on their business, whether it be education, or availability of staff, or taxes, or the economy, and so on.

So I think you have to take it in perspective. They have come back and told us, yes, I got my loan. So they're saying that the access is not the issue as perhaps it was made out to be.

Mr. Walt Lastewka: Thank you, Madam Chair.

The Chair: Thank you.

Do you have any more questions?

Mr. Jim Pankiw: I have three questions that shouldn't take long; they're not crucial.

In regard to the figures for final approval rates that you have here on page 32 of your presentation, I wonder, because we have legislation actually before the House of Commons right now about this, do those numbers include loans approved under the Small Business Loans Act?

Mr. Ian Lightstone: They would, in terms of those people who went to a financial institution—I believe that's where you go. So that would be included in there, as well.

Mr. Jim Pankiw: It would be included?

Mr. Ian Lightstone: Yes. It's only a small percentage, as you know, in terms of the total percentage who actually have an SBL.

Mr. Jim Pankiw: Yes, but now we see from 1996 to 1998 an improvement in the final approval rate. To what do you attribute that?

Mr. Ian Lightstone: When you say to what do you attribute that, I think the economy itself has changed dramatically over the past couple of years in terms of moving out of the early 1990s, which were not the most pleasant times for businesses in general. And secondly, it's a more buoyant economy. As Mr. Shaughnessy said, the balance sheets are more positive. We're seeing here that there's a higher reliance on retained earnings, meaning retained earnings are being kept in their businesses.

So I think overall what you're seeing is better balance sheets, more prosperous businesses, business owners with more confidence from a variety of things. It's sort of a circular approach: they're going in for requests; those requests are being approved; they're being more successful in their businesses. A variety of things are leading to the higher response rates or the approval rates.

Mr. Jim Pankiw: Do you think what you just said is consistent with page 17, where 12% identified a weak economy as the key issue affecting this?

Mr. Ian Lightstone: Yes, I think it is consistent.

Again, I think if you ask people what the range of issues are, and when you talk about weak economy, I can sit here and say the economy in Canada is very strong but the economy in Russia is very weak; that may have some impact on me as a business owner. Am I concerned about the Asian economic situation? Yes, I am, but it doesn't mean it has any other impact in terms of running my business.

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I think you have to look at page 17 and ask them what their concerns are. If I'm a good business owner, I have a variety of concerns. There are a lot of different things that impact on my business, my operations, my financing, my relations with government, etc. They have given us a very long checklist of over 40 items that say “These are concerns I have”, and they've tried to put them in some sort of order.

Mr. Jim Pankiw: So with respect to the approval rate on page 32, nothing would suggest or indicate that the Small Business Loans Act is responsible for that improved—

Mr. Ian Lightstone: I couldn't make that linkage from here. You could perhaps do some very sophisticated analysis and see in the percentages, but that goes beyond the scope of this study.

Mr. Jim Pankiw: On that, maybe I can take advantage of the other expert witnesses we have here today.

Mr. Shaughnessy, you obviously agree that when banks lend money, they take a risk, and in exchange for that risk they receive interest.

Mr. Kelly Shaughnessy: Yes.

Mr. Jim Pankiw: With the Small Business Loans Act the taxpayer incurs 85% of the risk, but the bank still receives the same amount of interest. I wonder what your comments would be on that. It doesn't seem like a very good deal for taxpayers.

Mr. Kelly Shaughnessy: I don't know if it is the taxpayer alone who incurs 85% of the program losses. If I understand the minister and the vision and the intent of the program, it is to make the program self-funding. There are up-front fees to be paid, and that goes direct to the program, and then there are annual fees—I believe it is one and a quarter percent on the outstanding balance—that go directly to the program.

I'm not in a position to say what Industry Canada is incurring, but it is certainly not 85% of the loss. There are insurance fees and annual fees that are applicable to that program.

The Chair: How about we wait until we do have Bill C-53 before the committee? The CBA and the banks will be before us as witnesses to comment on the SBLA and the new proposed act.

Mr. Jim Pankiw: Right.

I'm just wondering why you didn't do this a little bit more focused. You have a range of under $50 million in gross sales, or whatever your parameter was, but I think two-thirds of them were under $1 million. Wouldn't mixing a fairly diverse group of sized businesses together skew things a little bit? Why wouldn't you have said you were only going to deal with businesses under $500,000 to get a real clear picture of that one group? If you mix it up, you don't really have a clear picture of anything, do you—or do you?

Mr. Ian Lightstone: There are two things. One, this was the mandate I believe that was given to the CBA, and Mr. Shaughnessy might want to comment further on why it was decided it would be $50 million. That was the mandate for us to survey.

But again, there are two things when you say skewed. One, the sample had that large component of under $1 million. In our data, if you go through volume two, you'll have columns that indicate, in terms of looking at responses solely of businesses under $250,000 or under $500,000, that we have a very sizeable base to look at those very small businesses. So you can look at them individually.

But if anything is skewed, even though the sample says it goes up to $50 million, what skews it is actually the small businesses. They are the ones that have the largest representation, and they are skewing it in the sense that the bulk of the answers are coming from them.

Mr. Jim Pankiw: Fair enough. So when you looked at those breakdowns that you have, did you identify any that deviate from the norm? The overall figures you're quoting here are the average of everything, but when you looked at the breakdowns, was there anything that jumped out at you and said, do you know what, when we look at businesses in these particular parameters, this is really substantially different from the rest of the sample we looked at?

Mr. Ian Lightstone: We do, in terms of the detailed report, examine various different subgroups, and without saying that something dramatically jumped out, there are certain differences that are reported. By and large, if you look at, for example, the access to credit and the one chart you have here, when you look at the approval rates by small, medium, and large businesses, you can see that the approval rates are consistently strong in all of them. So on page 35, when you look at the approval rate for businesses under $250,000, it is at 90%; those from $250,000 to $500,000 are at 98%.

So yes, we look for things that jump out. On the surface today, I don't see anything that really jumps out in a negative way as it relates to the small segment of the SME population.

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Mr. Jim Pankiw: So on page 35 you're saying this is pretty typical. Whatever parameters you are looking at, this consistency is pretty typical between the different groups.

Mr. Ian Lightstone: Yes, in the different areas. There is consistency across the data. There will be certain issues and certain areas where perhaps the larger businesses, i.e. those over $5 million, respond in a slightly different way or in a significant way. But by and large, I think we have seen in this year's study, as well as in previous year's studies, a fair degree of consistency across the two levels of small: the real small and the medium-sized small. We do zero in on that. There is a significant amount of commentary relating to the small-sized part of the SME population.

Overall, I think their levels of satisfaction are fairly consistent with the larger ones. Certainly their approval rates are more than consistent. Their use of credit—we know the larger businesses are more likely to go to financial institutions for lending—that has been shown consistently—more so than the smaller ones.

So there are some differences, and certainly I'm prepared to talk about those, but I think you have to get into each individual. But by and large, the data are relatively consistent from one group to another.

The Chair: Thank you very much, Mr. Pankiw.

Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): I would just like to refer to page 47, which talks about satisfaction with the main financial institutions. One is a question of methodology. I'm not quite sure how you rank these individual categories. For instance, “provides convenient business banking”, “provides sufficient credit”—are they all ranked equally somehow in your survey?

Mr. Ian Lightstone: We read out these items on a random basis, so when we get into asking some questions of how you would rate your satisfaction with your main financial institution, as you can see there are six items in there. We asked them, “Using a scale of one to ten, how would you rate your financial institution on being flexible in meeting your changing operational needs?” We asked their rating on each of those six items individually. The order in which we asked them is actually rotated. It isn't always the first one, as you see in that list.

Mr. Alex Shepherd: But why do you assume they have equality?

Mr. Ian Lightstone: I have not put any assumptions of equality in here. What I have done in the report is indicate in terms of those where they have the highest level of satisfaction down to the items where they have the lowest satisfaction. Does it mean that providing convenient business banking is more important to the business owner than flexibility and meeting changing operational needs? You can't read it from that table, but in our analysis, and it's a fairly complex analysis, we do what's called “the drivers of customer satisfaction” in the detailed report. In that part of our report, we ask what are the elements the business owner actually puts the most emphasis on.

To summarize it very quickly, what we are finding is that those elements relating to flexibility and commitment are the ones that are the most important. So in this report we do indicate those things where business owners say “this is the most crucial issue to me”. You can't read that off page 47, and that wasn't my intent there. It was just to show the levels of satisfaction.

Mr. Alex Shepherd: Just to clarify one thing, you have this figure of overall service satisfaction, 65%. The first category is 66%, and everything gets worse after that. How do you get an average of 65%?

Mr. Ian Lightstone: The first question is an overall rating of your financial institution. It's asked independently of those other six items. It's not an average of the six-item rating. We ask them on an individual attribute basis how satisfied they are with the convenience, the flexibility. We get ratings on each of those. Then, by the way, on an overall basis, we ask them how they would rate their satisfaction with their main financial institution. That is what that 65% is. It's an overall, catch-all type of response.

Mr. Alex Shepherd: But getting down to the fundamentals, how does one relate “the bank supports you in good times and bad times”, compared to convenience of banking services—in other words, can you find your way into the branch and will somebody talk to you? How does that relate to “times are bad and they're going to call my loan”? I have a problem as to why they are all grouped in the same category.

Mr. Ian Lightstone: They all relate to evaluating your financial institution. There were six different measures that were agreed upon to say, let's evaluate the financial institution on these. As you can see, most of them are focused on access to credit or financing, because this was one of the areas the study was focusing on. There are six of them.

We do know that in terms of what drives customer satisfaction overall—if we look at page 136 in terms of how business owners look at it in a more detailed way—what is number one is flexibility and meeting changing operational needs; providing convenient business banking is number two in terms of the importance and the impact it has on driving or affecting their level of satisfaction.

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You ask, how can you mix the two? Showing support—well, 50% don't go to a financial institution, so I may not be as concerned about that. But in terms of convenience, it is a very important issue, and one that is certainly—

Mr. Alex Shepherd: It's also a snapshot of an economy under recovery. So this last question as to if it supports you in good times or in bad could be somewhat skewed as well because of the economic conditions that exist. If you took the same snapshot maybe in the late eighties, you would get a higher number.

We touched very briefly on so-called relationship banking, and it seems to me this indicates that over half of the people do not trust their banks.

Mr. Ian Lightstone: I don't think you can make that statement. Trust is not involved in a question in here. I don't think that's a fair interpretation.

Mr. Alex Shepherd: It refers to if it supports you in good times and in bad. It seems to me that the vast majority of people don't trust them not to call their loans in bad times.

Mr. Ian Lightstone: I could not comment on that. I don't see where you come up with that interpretation.

Mr. Alex Shepherd: It's the same thing with flexibility. The majority of people think that there is no flexibility in the loan structure.

Mr. Ian Lightstone: Fifty-three percent say they're satisfied with the level of flexibility in meeting changing operational needs—or 47% are flexible on structure in loans. That is correct. These are perceptions they have, but it doesn't imply trust or mistrust.

Mr. Alex Shepherd: Because of loans being on a short-term or demand basis, those two figures can tell you that if times are bad, using a 30-day call notice banks can simply call your loan.

Mr. Ian Lightstone: I think you're reading more into it than is here. You're asking business owners, on a perceptual basis, if they are satisfied with the way the banks support them in good times and in bad times. A certain percentage says yes, I'm satisfied, and a certain percentage says no, I'm not.

Mr. Alex Shepherd: The majority says they're not.

Mr. Ian Lightstone: That is correct. That's the perception they had at the time. Whether or not it is a fact, it is a perception. If you go to the next page and look at the borrowers, you will see that they have a much higher level of satisfaction and support.

Mr. Alex Shepherd: The MacKay task force talked about the fact that Canadian small businesses were less happy with their financial institutions than are their American counterparts. Do you know why that would be?

Mr. Ian Lightstone: I don't have the figures in terms of U.S. statistics versus ours. This is the Canadian profile. As I said, there are numbers that show satisfaction has been declining in the U.S., as there has been declining satisfaction in Canada. I can't answer that in terms of the U.S.—

Mr. Alex Shepherd: What is worse is that these figures we are talking about as to if they support you in good times and in bad are getting worse. Is that correct?

Mr. Ian Lightstone: In terms of the level of satisfaction, that is an increased perception, yes.

Mr. Alex Shepherd: Okay. Thank you.

The Chair: Mr. Shaughnessy, did you have a comment?

Mr. Kelly Shaughnessy: One thing we have to keep in mind is that we can't take one of these numbers on the satisfied side of these various attributes and come to the conclusion that the balance is dissatisfied. If you look at the three columns to the right of those numbers, there are numbers that indicate no opinion, neutral, and dissatisfied. It does not mean that if 66% say that banks provide convenient banking services, the remaining 34% are dissatisfied. The actual numbers are that 1% are expressing no opinion, 14% are dissatisfied, and 19% are neutral on the matter.

Mr. Alex Shepherd: You know what they say about liars and figures: figures don't lie, but liars can figure. You can manipulate these things to tell any story you want.

Mr. Ian Lightstone: We don't manipulate the numbers, Mr. Shepherd; we report the numbers. I do find that offensive. We don't manipulate, we report. I think Mr. Shaughnessy made a very good comment there. Sixty-six percent are satisfied, and only fourteen percent say they are dissatisfied. So read the numbers. The numbers speak for themselves, and they are honest numbers.

Mr. Alex Shepherd: But the majority of people do not believe you will support them in bad times.

Mr. Ian Lightstone: No, that's not the question. It's that 47% say they're satisfied with that feeling, 25% say they are dissatisfied, and another 8% are neutral. So I think you have to read those numbers as they are stated.

The Chair: Madam Lalonde, you had one brief question.

[Translation]

Ms. Francine Lalonde: I looked at the sample and saw that 1,451 businesses out of 3,190 are from Ontario.

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Is it possible that the sample is not completely representative? In British Columbia and the Territories, there are only 280. It is on page 12. We know that Ontario's economy tends to be in better health.

[English]

Mr. Ian Lightstone: May I just comment on that?

Remember that this is made up of two components. Approximately 700 interviews were done on a national basis, and an additional 500 or 600 were taken from the fall study. We did that because where the questions were the same it made for a more robust sample. So while we have a very large component of actual interviews, what I do want to emphasize is that when the data are presented on a total national basis, they are put in the proper proportions. They are weighted higher or lower. So it is representative.

For example, I believe the population of Quebec is about 25% or 26%. While 486 may not be 25% or 26% of 3,190, in the total weighted and—

[Translation]

Ms. Francine Lalonde: This is not 24% of 3,190.

[English]

Mr. Ian Lighthouse: No, those are absolute numbers. You can't take that percentage as 25% of the 3,190, because 500 interviews from the other, Ontario-based study were added into here.

In the end, we had quota samples from each region. We wanted to make sure of that, because if we just took the sample of Ontario and Quebec on a random basis, there would be very few participants in the Atlantic regions and some of the smaller provinces. So for the companies we interview, we do it on a disproportionate basis in order that all regions of the country are representative. When we present the results on a tabular basis, we weight them so that the Quebec population and the Ontario population are in their proper proportions. In that sense, all the numbers you're reading are not skewed by this larger Ontario sample, nor are they skewed by what is a larger Quebec sample in some cases.

The Chair: I said that would be it for questions, Mr. Dubé. I had said there would be four more, and we have to move on.

[Translation]

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): There is no problem. I will speak next week.

[English]

The Chair: Anyhow, as Madame Lalonde said, Mr. Lightstone, you should take note that in southwestern Ontario there is only an 88% final loan approval rate. You said there were no major differences. When you look at page 35, I find 88% to be extremely low when compared to all the rest of the regions.

Mr. Ian Lightstone: It's lower than the others, yes—

The Chair: And it doesn't make a whole lot of sense. When you say southwestern Ontario is everything outside of Metro Toronto and lower, your group has put together a region that is far too large to tap any kind of bearing. I've explained that several times to the CBA now. The GDP for Windsor, Essex, and Kent counties is equivalent to that of the entire province of Manitoba. This area that you're comparing is huge, so it doesn't really tell us anything. Personally, I find it very difficult to follow.

When I see this number coming in very low, it causes me great concern that it's only 88%. Knowing how large the area is, I don't really know where it's coming from or where the problems are, but it leads me to believe there are extreme problems in southwestern Ontario versus the rest of Canada.

Mr. Ian Lightstone: That 88% is lower than the 93%. I believe that's bordering on the significant, as we've reported there. Unfortunately, the definition that we've been given to look at is what's called southwestern Ontario.

The Chair: I understand what you've been given, but when you look at Ontario and you look at 88% versus 95% and 98%, and not versus 93% or 90%—and that's what I'm doing, I'm just looking at this versus Ontario—I'd say there are some definite problems there. It doesn't make a whole lot of sense other than to cause me concern in terms of which way the economy's heading.

That being said, I think we should move on. We appreciate the time you've given us, we appreciate your comments, and we appreciate your patience with our questions.

I will now turn it back over to Mr. Shaughnessy and Mr. Young for the next part of our program today.

Mr. Alan Young: Thank you very much, Madam Chair and members of the committee.

For the past number of years, as you're aware, the banking industry has worked with you on research and reporting initiatives that are designed to assess the needs and the experiences of SMEs in Canada. As a result of the partnership arrangement that we have, we have a wealth of information providing us with a better understanding of the dynamic nature of our small-business sector.

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What we wish to propose for your consideration and approval is a redirection of these efforts that will respond in a positive way to the knowledge we've gained from the research we've conducted and research that has been conducted by the government and that will provide needed assistance to small businesses across Canada. Essentially what we'll be suggesting is to turn this research into action.

The banking industry proposes to provide, in partnership with members of Parliament and with other partners, a national series of educational and information seminars that are similar to the CBA's “Preparing Business for the Year 2000” seminar program. These small-business seminars could be aimed at women, aboriginals, youth, and tourism-related businesses in the start-up phase of their operations. It would provide needed assistance, with general and financial management skills and increased awareness of the importance and availability of various sources of financing. This proposed seminar series would replace the annual national SME survey as a practical and effective means of responding to the data we've gathered over the years.

It's important to remember that the three years of national SME research is the foundation on which we're building this proposal, and it can stand as a benchmark on which future research projects can be developed. Although we're proposing to replace the annual survey, we would continue of course to provide regular reports on our business-lending statistics by the seven reporting banks and would be pleased to appear before the industry committee at all times at your invitation.

The issues surrounding how research on small and medium-sized businesses will be conducted in the future will certainly be discussed in the coming months.

As Mr. Shaughnessy mentioned in his remarks and as I have alluded to on a couple of occasions in responses today, the task force on the future of the financial services sector, the MacKay task force, recommends that StatsCan collect, analyse, and publish data on SME financing by all regulated and non-regulated providers on an annual basis. It also recommends that Industry Canada assume responsibility for conducting annual research on SMEs and regular benchmark surveys on SME financing needs and sources.

We're very encouraged that the task force has recognized that without detailed information from all providers of financing, it's impossible to really tell whether the capital needs of small and medium-sized businesses are being met. We'll be working with the government on these matters over the coming weeks.

Now, this proposal has not been developed in isolation. Comments have been made by committee members during our industry appearances that have contributed to the direction of this proposal. We understand that members have interest in training and education for small business and have identified young people and start-up businesses as appropriate targets.

Our research and research the federal government has done reveals that women, aboriginals, and tourism-related businesses are more prominent in the start-up phase than other segments of the SME population. Targeting these seminars to these groups would allow for the delivery of skills development assistance to the most active segments of this start-up market. Youth would also be a logical target for the seminars, given the level of youth unemployment and the interest in youth entrepreneurship. These seminars could be tailored to meet the needs of the local area, which we would wish to discuss with the local member of Parliament.

There are a number of research papers that have been done in recent years that explain why small businesses, particularly start-up businesses, fail. In large measure, they fail due to a lack of knowledge and basic skills in market development and financial knowledge. Without having this skill level augmented, they risk a higher degree of failure.

The other thing the research has shown is that the fastest-growing and the most successful new entrants in the small-business area have two financing characteristics in common. One is a wider variety of sources. Mr. Lightstone's data reveal that small businesses are approaching a broader number of financiers. And the second factor is a larger proportion of permanent capital, equity. These two things provide greater flexibility in terms of dealing with economic downturns and less dependence on any one particular financier. Thus, these proposed seminars would also have a segment devoted to the various sources of financing.

By focusing specifically on the educational and the information needs of small start-up operations, the program would attempt to mitigate the higher degree of risk. The seminars would be designed using the template from the model we've used in partnership with MPs, and that is the “Preparing Business for the Year 2000” seminars. Some of you have had, I believe, these seminars conducted in your constituencies in recent months.

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In response to the year 2000 report of the task force, the CBA launched the Y2K seminar series to help increase awareness of this issue among small-business owners. We have received very positive responses from small businesses and from MPs with whom we've partnered. In your kit today we have included a summary of the results we have received so far from the seminars. So far, 70 of these seminars have been conducted across Canada, and an additional 15 will be done before the end of this month.

The success of the year 2000 seminar program has taught us that we can organize and deliver a national seminar series. It has given us the confidence and the framework on which we can build the start-up seminar project that we're proposing to you today. To launch the start-ups we're proposing will require a great deal of effort and resources and it will require consultation with members of this committee. As we have done with the year 2000 seminars, we would be looking for partners to augment our efforts.

We believe this proposal would build on the results of our existing research. It would respond to committee members' concerns and assist you in your efforts to address your constituents' small-business issues.

Research is necessary and it's useful. It's particularly useful if good use is made of it. We're proposing that we move from observation to action. Research has identified that start-up businesses can benefit from assistance with general and financial management skills and increased awareness of the importance and availability of various alternate financing sources. So we believe that this proposed initiative would act on these findings and would allow small businesses to develop the habits and the tools they need to become prosperous enterprises and to grow successfully.

Thank you for your attention to my brief remarks. We look forward to your consideration of this proposal.

The Chair: Thank you very much, Mr. Young.

For the committee members, there are a couple of different options on how to deal with the proposal. I welcome your comments.

I would remind you of what was discussed or came up earlier during our question and answer period: that the MacKay task force had recommended that the industry department take over a statistical analysis of small and medium-sized businesses. We do have the possibility of having some comment from them on that particular issue, perhaps when we meet with them in the near future on Bill C-53, whenever that may be. I anticipate it will be sometime soon.

That being said, the CBA has asked us to deal with this in a rather prudent manner, because they do have to make some decisions and commitments about the survey and whether or not to proceed with Lightstone's survey.

My other suggestion would be that we ask our researchers to take a look at the report back to 1996, when it was suggested that the Lightstone survey would be undertaken in cooperation with the CBA, the rationale behind that, and what the ramifications would be of not doing that, the pros and cons of moving on to something like this, and reporting back to us either at a full committee meeting next week or a steering committee meeting.

I welcome your comments on this. If you want further clarification, Mr. Shaughnessy and Mr. Young are here to discuss all the different avenues to date.

Mr. Pankiw.

Mr. Jim Pankiw: I require further clarification, from you or whoever. As you know, I've been on the committee only a year, so could you just explain to me— I take it that starting in 1996 the Thompson Lightstone survey started being conducted in association or conjunction or— What involvement does the CBA have with this study, exactly?

The Chair: The CBA commissioned the study and pays for the study and did it at the request of the industry committee. The industry committee had a very long process and came out with a report called Taking Care of Small Business. I think that was the correct title. From that report there were a number of recommendations, one of which was they wanted to ensure that there was access to financing and that the banks were meeting the needs of small and medium-sized businesses. So this was seen as an overview of statistics that could come back to the committee.

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We've now had the report for three years. We have three years' worth of statistics and three years of conversations. At the meeting last November, if I recall correctly, there were some members who expressed concern about the usefulness of the survey. Some members were new to the committee. There were suggestions made at the meeting last November that have been taken into account by Mr. Lightstone, in particular on Madam Jennings' suggestion. She obviously was very pleased that was incorporated into this year's study, as were other members of the committee.

So that's kind of where it's at right now, and the rationale behind it.

Mr. Jim Pankiw: Okay. And now what CBA's proposing is to discontinue the Lightstone survey and implement a series of seminars, and they would then come back and report to us what happened at the seminars and what information they gathered?

The Chair: I don't believe—and maybe Mr. Shaughnessy or Mr. Young want to comment—that they're actually agreeing to report back to us on the seminars. What they did say was they would be willing to meet with the committee at invitation, in particular on the quarterly statistics, which they would continue to provide. But I assume if we issued another invitation they would be more than happy to meet with us from time to time.

Mr. Kelly Shaughnessy: Very definitely.

Mr. Jim Pankiw: But what you're saying is we've done this for three years and there's no point in continuing the study year by year?

The Chair: No, no. I think what they're saying is the MacKay task force has made a clear recommendation that the industry department should take over statistics on small and medium-sized business and broaden the range so that it takes into account, as a number of questions have come up from a number of people today, all the people and all the players that lend to small and medium-sized businesses.

As Mr. Ianno and several— There were discussions on what percentage actually comes from the seven larger financial institutions and what comes from smaller. Mr. Lightstone has indicated that in the survey there are other institutions taken into consideration, but we're still not getting a total picture, necessarily, across the board, which is what the MacKay task force is recommending or suggesting as well.

That being said, I'm not sure, and that's why I suggested we may need to meet with industry. Maybe Mr. Lastewka can further clarify this.

Mr. Walt Lastewka: Madam Chair, I think your suggestion is valid. We must remember that we're in the middle of changing members on our committee.

If the researchers go back and give us a short one- or two-pager to answer some of the questions Mr. Pankiw has asked and other people have asked, taking into consideration where the Lightstone started, where we are today, and the proposal by the CBA, and that be brought to the steering committee and then to the new full committee of industry, it will answer a lot of the questions and give us a chance to have some dialogue and go from there.

The Chair: The researcher has just informed me that she could update the brief she prepared for today's meeting and add more to that to provide more information to the committee members.

Mr. Walt Lastewka: Yes.

The Chair: Again, I want to stress that we need to do this in a very timely fashion, because the CBA has to make a decision very shortly on what they're going to do. The survey takes a long time for Mr. Lightstone to do, obviously, if they're spending a half hour with each business and trying to gather and then assemble the information.

I would suggest that we proceed along the lines where we have the researcher do a little more information. My understanding is next Tuesday we'll reconstitute the committee. We could have a steering committee meeting either Tuesday or Wednesday and bring a suggestion back to the full committee. Or if we need to meet with industry as well, it would have to be on Tuesday or Wednesday of next week on that same basis.

Madame Lalonde, do you have a comment?

[Translation]

Ms. Francine Lalonde: I think that what you suggest makes a lot of sense. Actually, I am reassured that the Association is not suggesting that we choose between the study and assistance for start-up businesses. We will look at the way the study should be carried out.

Mr. Antoine Dubé: And we will see who should do it.

Ms. Francine Lalonde: And who should do it. We will also look at the start-up business assistance issue. Well, this is my position: there is no choosing between the two.

[English]

The Chair: Mr. Shaughnessy.

Mr. Kelly Shaughnessy: Madam Chair, firstly, it's coincidence that the MacKay task force has come down. As you know, the proposal was submitted before the task force came down. Coincidentally, the MacKay task force is proposing that Industry Canada assume responsibility for the gathering of information that is reflected in this report and for the credit statistics, not, I don't think, to relieve the CBA of doing it, but because what we need is a broader audience, certainly on the credit statistics.

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To Madame Lalonde's point—don't give us a choice, don't make it a trade-off—what we have to keep in mind is that the CBA is an industry association. It's not all the banks, and they can only focus on so many things at one point in time. So I wouldn't want the committee to think we're saying you have to take one or the other, but the fact of the matter is that the CBA only has a given number of resources, a given capacity, and we will not eliminate things like the “Preparing Business for the Year 2000” seminars and things of that nature if you say you have to do the survey, but it certainly limits the ability of the CBA to come out with a seminar program of the breadth we're talking of in this proposal.

Mr. Alan Young: If I could add to that, there are a couple of issues. One is the question of which organization will be conducting a survey along these lines. I guess the second question is how frequently should the survey be done. There's an issue as to whether it need be done on an annual basis, or whether every two or three years a survey of this nature could be conducted. A lot of organizations, like chambers of commerce and the Canadian Federation of Independent Business, do their surveys every two, three, or four years and build a body of knowledge and do benchmark surveys. So that's another part of the issue here.

The Chair: Along those lines, Madame Lalonde raised a very interesting point earlier in our discussion about the possibility of a longitudinal type of study. Have you thought about that at all, or what the ramifications are, or something along that line to actually see the same group of companies from one year to the next, or from one year to say two or three years later, or something along that line? Is that feasible or not?

Mr. Alan Young: It is something to which we had not given thought, but we will give thought to that.

Mr. Kelly Shaughnessy: We would obviously have to sit down with Mr. Lightstone to get professional advice on that type of thing.

The Chair: Okay. I thought it was a very interesting question and comment she put forward earlier, and it's one way of tracking continued satisfaction versus that timeframe of satisfaction, as well as lending practices and dealings and continuity.

As Mr. Shaughnessy pointed out earlier, quite correctly, if you have a five-year loan with a bank, you're not going to be approaching them for new financing within that five-year time period. So you may only be in the first five years, or you may be in the second part. People's relationships change over time. Sometimes they become more committed; sometimes they become less so.

Mr. Alan Young: What we're trying to do is find what's most helpful for you.

The Chair: Yes.

Mr. Dubé.

[Translation]

Mr. Antoine Dubé: It may be a good thing that we know— They may not have to answer because they are the ones who pay, but could they tell us what has been done over the last three years and what is the annual cost in terms of percentage? If we must compare this with what the Department of Industry spends to do the same thing or something of the same nature, it may be a good thing that you tell us. I do not know if you can answer.

[English]

Mr. Kelly Shaughnessy: I don't know what the cost is. It's approximately $500,000.

[Translation]

Mr. Antoine Dubé: Thank you.

[English]

The Chair: Are there any other questions or comments? Mr. Pankiw.

Mr. Jim Pankiw: I missed the figure. How much is it?

Mr. Kelly Shaughnessy: It's $500,000.

Mr. Jim Pankiw: Thank you. I would like you to clarify, then, if your request is agreed upon, what involvement would the industry committee have if you go ahead and start conducting these seminars?

Mr. Alan Young: We would work in partnership with individual MPs, as we have done with the year 2000 seminars, in making arrangements in your local constituency to conduct the seminar, to make sure the proper people are there, the proper people are participating, the venue is a successful one, and we would discuss with you the issues you would want covered off in your particular area.

Mr. Jim Pankiw: But I'm asking about the industry committee here. If we decide, yes, we're going to accept the recommendations of the MacKay task force, assume responsibility for collecting this data ourselves or—

The Chair: It wouldn't be us, Mr. Pankiw. One of the recommendations of the MacKay task force—and there are many recommendations in there that are still out there for debate, and that's what the finance committee is doing—-is that the industry department and its branch for small and medium-sized businesses would undertake this.

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Mr. Jim Pankiw: Right. So if that were adopted, your relationship with the industry committee, at least in this respect, would be severed. Right?

Mr. Alan Young: We would be here on a regular basis with the business credit statistics. They would still be provided on a quarterly basis. We would still be here at the invitation of the committee. Whenever the committee issues an invitation to us on whatever issue related to small business we would, as we have done for the past several years, continue to appear.

Mr. Jim Pankiw: I think that's clear enough.

The Chair: Mr. Pankiw, just to clarify what the task force says, I'll read recommendation 105 so everyone understands it:

There should be more systematic and rigorous policy analysis of small business finance needs. To that end:

(a) An SME Finance Group should be established within Industry Canada to undertake continuing research on SME finance, including KBI enterprises. The SME Finance Group should oversee the user surveys, analyse the data collected by Statistics Canada and report annually to the Industry Committee of the House of Commons on the state of small business financing.

(b) The SME Finance Group should also pursue a program of special research on topical small business finance issues, such as the regional availability of finance, gender discrimination in SME finance, and aboriginal finance.

Mr. Jim Pankiw: So you're saying it's sort of either/or. You don't have the resources to undertake your seminar series and to continue commissioning the Lightstone study.

Mr. Alan Young: It is a question of focusing energy and efforts. If the committee members are of the view that continuing with this annual survey serves your needs best, then we will continue to do it.

The Chair: With respect, Mr. Young, this committee expressed some discontent last November when the Lightstone survey came up. There were new members on the committee at that time. Maybe over time they've come to value the survey more. The CBA was reacting to our suggestions or our discontent last November in proposing this. They're trying to answer our needs. That's why they're putting this proposal out there. I'm suggesting we should have the researchers take a look at what's happened over the last three years, why we were doing it, whether it is meeting the needs of the committee, what was better for the small and medium-sized business community in general, and come back together as a group probably in a few days.

Mr. Jim Pankiw: I'm just trying to ascertain if it's the will of the industry committee that they continue in the role they've played in the last three years. Are they still going to pursue the seminar series, or is it to them a matter of limited resources and it's one or the other?

Mr. Kelly Shaughnessy: I don't think the resources of the CBA and the focus that is required to run such a broad seminar series are there.

Mr. Jim Pankiw: It would preclude this.

Mr. Kelly Shaughnessy: I've had the honour over the last four years of working with this committee, and some of the members—I think Mr. Shepherd and Mr. Lastewka—have the tenure that I've had in association with the committee. From day one we've tried to talk about partnership with the committee, with members of Parliament. The year 2000 seminar has proven to us, as an industry, as banks and as members of Parliament, that partnership really works. The satisfaction level of that year 2000 seminar series is incredible.

That is very consistent with the individual banks. Any time the individual banks have taken seminars to small and medium-sized businesses, the satisfaction level has been well over 90% all the time. The tough thing with all these things is to get people out. If there are 24 hours in a day, entrepreneurs need 26 hours. The issue is to get them out to these things.

Where we find it works and how you get them out is through that partnership with the industry, with individual banks and with the members of Parliament. For some reason that chemistry really works and it gets people to the seminar series. So that's why we're proposing it.

The Chair: Mr. Shepherd, do you have a comment?

Mr. Alex Shepherd: Yes. And by the way, I would like to comment on your Y2K seminars, one of which was in my riding. It was very well done and I appreciated that. I know the people in my riding appreciated that.

Mr. Alan Young: Thank you.

Mr. Alex Shepherd: I think there is a general feeling, at least among some people, that we should move on a little bit. The concern I have— I think you've already stated that the business credit statistics will still be forthcoming.

Mr. Alan Young: Yes, they will.

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Mr. Alex Shepherd: I don't know what interface Industry Canada would need to secure more information and so forth. Presumably it goes without saying that there would be some cooperation there with Industry Canada to provide whatever statistics they wanted to collect if they implemented the MacKay task force.

Mr. Alan Young: Our statistics are already public and they are available to Industry Canada.

Mr. Kelly Shaughnessy: I think the concerns of the task force were not relative to the banks reporting. It was that you're only getting half the picture. What the task force is saying is take in the whole universe, not only the banks, and we would certainly continue that partnership.

Mr. Alex Shepherd: The program you're talking about implementing— how many seminars? What would the distribution of those seminars be in Canada? Is there some kind of allocation? So many to rural areas, so many to urban areas, and so forth?

Mr. Alan Young: If we get your concurrence in proceeding, we would work out these sorts of details. With the year 2000 seminars, there will be close to 80 or 85 across the country in all regions, but the details would be worked out with you, if you agree in principle that we should proceed on this basis.

Mr. Alex Shepherd: Okay. So some of the things I've touched on we would talk about at a later date. Is there some kind of an accountability framework, a measuring tool, in place to see how successful they are?

Mr. Alan Young: We do have this report. We do survey people who attend the Y2K seminars.

Mr. Alex Shepherd: I'm aware of that.

Mr. Alan Young: As Mr. Shaughnessy said, the rate of people who are happy with it is about 97%. We're obviously very happy to report that.

Mr. Alex Shepherd: The other thing would be how inclusive it is. In other words, obviously we wouldn't want it to be just promoted among bank customers, inclusive of the entire—

Mr. Alan Young: It would be an entire community. In your constituency it wouldn't just be bank customers, no. It would be everybody who chose to show up at the arena or the school gymnasium, or wherever the event was being held.

The Chair: Mr. Bellemare and Mr. Pankiw.

Mr. Eugène Bellemare: I have to commend the Canadian Bankers Association regarding their work on Y2K and having all these seminars. These seminars would not be oriented only to business people; they could be for other individuals.

Mr. Alan Young: The year 2000 seminars are available to anybody. They were advertised locally. MPs had the opportunity to make sure that groups—whether they were business groups or social groups, it didn't matter—were invited to participate.

Mr. Eugène Bellemare: Is this still going on? Can it still be done?

Mr. Alan Young: Yes, the seminars are still proceeding. We have several more.

Mr. Eugène Bellemare: When are you going to end these seminars?

Mr. Alan Young: I don't know for sure, but we do have about 15 lined up. If you have a need in your constituency for one, we'd be happy to arrange it.

Mr. Eugène Bellemare: What is the minimum number of people you would require to register?

Mr. Alan Young: The numbers of people who have attended these seminars range quite dramatically depending on the location. We would run them if 10 people showed up; we'd run them if 1,000 people showed up.

Mr. Eugène Bellemare: Thank you very much.

The Chair: Mr. Pankiw.

Mr. Jim Pankiw: I would like some clarification. The Lightstone study was commissioned by the CBA and paid for entirely by the CBA, but would the seminar series you're proposing work under your existing budget guidelines, or would there be a cost incurred by Industry Canada that currently isn't incurred?

Mr. Alan Young: There wouldn't be a cost to Industry Canada for the seminars. That would be a CBA cost. We would absorb the cost of putting together the seminar package and running it across the country, and we would be doing it in partnership. For the Y2K seminars, we've partnered with MPs; we've also partnered with the Canadian Institute of Chartered Accountants, chambers of commerce, and other groups.

The Chair: May I just clarify? Is there a small registration fee for the Y2K seminars or not? Is it $10, $15?

Mr. Alan Young: I'm told that it depends on the location.

The Chair: Okay.

Mr. Pankiw, does that answer your question?

Mr. Jim Pankiw: It does. Thank you.

The Chair: My suggestion, and the researcher has agreed, is that she will circulate to committee members, as soon as the list is tabled in the House, which I anticipate is now—a list of the new members—the sections from Taking Care of Small Business that resulted in the CBA conducting the Lightstone study, an updated part or a little more detail on what she had already circulated for today's meeting.

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I propose that at our first meeting on Tuesday we have a steering committee meeting afterwards. I'll try to determine if we'll be able to meet with Industry Canada with regard to that section or not. I don't know if they've even looked at those recommendations yet—before that meeting or on Wednesday.

We'd like to make a decision next week so that the CBA can make a decision. Because the House won't be sitting the following week, I think it's pertinent that we make a decision at our meeting next Thursday. Whatever happens on Thursday at that meeting, or after that meeting, we can set aside a bit of time to make a decision.

So if members can try to focus on that, and remember, we're going to do this. And take the opportunity to read through the information the researcher will be circulating.

I want to thank you again, Mr. Shaughnessy and Mr. Young. I want to thank the CBA for the Lightstone survey, and I want to thank Mr. Lightstone for his generous time today, to be with us and to answer our questions. We appreciate everything you've done to keep us informed on small and medium-sized business financing.

The meeting is now adjourned.