Thank you very much, Mr. Chair and committee members, and thank you for the invitation.
I’m Wendy Hannam, executive vice-president for sales and service, products and marketing, in international banking with Scotiabank. Scotiabank is Canada's most international bank, with operations in 55 countries and a team of more than 75,000 employees serving over 19 million customers around the world.
Our international banking division encompasses all of the bank's personal and commercial banking services outside Canada, primarily in the Caribbean, Latin America, and Asia. I am responsible for strategic planning, management, and delivery of personal banking services and small business banking services through our team of 36,000 employees in 45 countries.
I've been engaged in conversations throughout the past year with the Canadian International Development Agency on enhancing collaboration between Scotiabank and CIDA. I'm pleased to have the opportunity to address this committee about Scotiabank's experience and its ideas about achieving international development goals.
The committee has specifically noted an interest in how private sector entities can be catalysts in generating long-term economic growth and alleviating poverty in developing countries. We strongly support this vision and approach. There's a growing consensus that growth, poverty reduction, and improving people's lives require a vibrant private sector and active partnership in economic development.
Today I'd like to speak with you about Scotiabank's history and approach in developing markets, the link between development objectives and the business of banking, and some relevant success Scotiabank has had in this area. I'll also offer some recommendations based on what has worked well.
First I'll speak about our approach to developing markets. The issue of how best to achieve development goals in emerging markets is a very important one for Scotiabank, given our deep roots and more than 120 years of history in developing countries, beginning with the opening of our first branch in Jamaica in 1889.
We take a grassroots approach and keep a long-term view of how best to contribute to the growth and development of local economies. We learn the market first, build strong relationships with governments and the private sector, establish a presence, and grow our operations over time. We hire locally and build our teams as much as possible with people who understand the unique local context. Because of our approach and long-term commitment, we are seen as a local bank in each market, and in many important ways we operate as a local bank.
Part of our commitment to corporate social responsibility is to have a very strong presence in local communities, which we do through our support of hundreds of local and regional charities, civic causes, and non-profit organizations. Scotiabank Bright Future, our global philanthropic and employee volunteer program, is aimed at addressing the needs of local communities at a grassroots level.
Scotiabank supports financial literacy initiatives that provide customers with access to education, resources, and advice related to personal finances. For example, we're partners with Junior Achievement on the Economics for Success program in 10 countries in Canada, Latin America, and the Caribbean. This program teaches students the fundamentals of personal finance and explores related education and career opportunities.
But while philanthropy does have a meaningful impact on local communities in developing markets and is a major component of what might be considered traditional CSR, it is not what I want to highlight today. Over 90% of jobs in developing countries are in the private sector. The pace of job growth and quality of employment in the private sector are critical to development. The involvement of the poor in economic growth through formal markets—known as pro-poor growth—is the best way to get people out of poverty and represents the exit strategy for government aid.
Making businesses more inclusive is essential. An inclusive business is one that seeks to alleviate poverty by including lower-income communities within its value chain, while not losing sight of the ultimate goal of business, which is to generate a profit. A real impact can be made by leveraging these for-profit businesses.
Inclusive growth is both broad-based across sectors and inclusive of the large part of the country's labour force. It includes attention to the welfare of the poor, but also to the opportunities for the majority of the labour force, poor and middle class alike. The inclusive growth approach looks to productive employment as an important means of increasing incomes of excluded groups.
I'll now be looking at the special role of the banking sector. The banking sector has a critical role to play. Generally it alleviates poverty and inequality by enabling economic growth through the provision of credit. In addition, the institutional infrastructure of the financial sector contributes by bringing down the cost of information, contracting, and transactions, which in turn accelerate growth.
In addition, with governments facing the challenge of developing infrastructure with limited budgets, banks help to address this gap through the design, structuring, and implementation of financial solutions for infrastructure projects. Scotiabank has a specialized unit, Global Infrastructure Finance, with dedicated teams for Latin America, Europe, and Asia. For the developing countries in Latin America, we focus mainly on those countries where the bank has a banking presence—Mexico, Chile, Peru, Colombia, and Brazil.
Perhaps most important, banks directly address poverty by providing access to basic banking services in a formal market, acting as a force of inclusion. In most developing countries, access to formal financial services is limited to 20% to 50% of the population. There is now growing awareness that access to a wide set of financial tools, such as savings products, payment services, and microfinance, provides the poor with much greater capacity to increase or stabilize their income, build assets, and become more resilient to economic shocks while increasing family security.
Speaking to our success in Haiti, Scotiabank's experience in Haiti following the devastating earthquake in January 2010 provides a good example of the different roles philanthropy and inclusive business each play in a crisis in a developing country. Immediately following the earthquake, our team in Haiti worked around the clock to ensure branches were safe and secure for the return of our customers and employees, opening three of our four Haitian branches within just a few days. Scotiabank assisted international agencies in distributing aid to 100,000 people, donated funds to the Red Cross and our employee relief fund, and helped arrange temporary housing for those who needed it.
In late 2010 the bank, together with Digicel, launched a mobile wallet financial service under the brand name TchoTcho Mobile. This service helped make banking accessible in a country where only 10% of people have a traditional bank account but 85% of households have access to a mobile phone. With much of the country's infrastructure damaged or destroyed by the earthquake, the service allowed customers to safely perform basic financial functions such as withdrawals, deposits, transfers, and payments to keep the economy moving. Businesses used the mobile wallet to accept payments from customers for goods and services and to pay their employees. The project has been a huge success in terms of financial inclusion and supporting development. It is also profitable.
At the end of 2011, TchoTcho Mobile had more than 473,000 users and handled almost 10,000 transactions a day in a country where just 4 million people have cellphones. The project is supported by a nationwide network of more than 900 correspondent agents. This project received international acclaim for its contribution to economic development, including the beyondBanking award of the Inter-American Development Bank and the 2011 Global Telecoms Business Innovation Award for consumer service innovation.
We're now preparing to launch a mobile wallet in Peru and El Salvador, and we plan to offer the service in other Latin American and Caribbean countries.
Another inclusive business initiative we've been very successful with is microfinance. Scotiabank provides innovative microfinance services to small-scale entrepreneurs and micro-business owners in Peru, Chile, Dominican Republic, Guatemala, and Jamaica. Our CrediScotia subsidiary in Peru is the bank's biggest microfinance operation. We define microfinance clients as self-employed or micro-business owners with annual gross revenues below $100,000 Canadian who need funding to invest in the development and growth of their business.
Microfinance has been shown to be an important driver of economic development in underserved communities. It is a key tool for supporting the goals and aspirations of women in particular. Approximately 60% of our microfinance clients in Peru are women. It also helps to grow the formal economy by providing accessible financing to people who would otherwise have to turn to informal channels.
To end with some recommendations, CIDA's three priority themes are already closely aligned with Scotiabank's values and activities. As described above, there is strong evidence that financial sector development provides a high impact on development overall. In Haiti, the Caribbean region, and Peru, there are already successes where the bank is working with CIDA, but there is clearly potential for our two organizations to do more. I have had very open and productive discussions with CIDA over the past year and look forward to continuing those discussions in specific areas we've identified.
Specifically, one, encourage CIDA to publish a private sector development strategy.
Two, as the role of the private sector becomes the increasing focus of governments, development agencies, and international financial institutions, the contributions of the private sector are not well understood or communicated by other stakeholders or the public. Increased communication among CIDA, private sector partners, and the public would help.
Three, given the limited resources and focus on budget restraint, the efficiency of assistance and maximum impact becomes critical. It is important that the public and private sectors leverage their comparative advantages. In light of this, CIDA should have flexibility to fund feasibility studies, co-invest, or assist in risk mitigation for private sector projects.
Four, scale is a key factor in maximizing impact and needs to be recognized. This means leveraging the strengths of large private sector partners and collaborating with multiple partners.
Five, ask whether CIDA is currently structured to have the flexibility and mandate to effectively engage with the private sector. There are a range of models for development agencies, development banks, and international finance institutions. The committee should consider whether CIDA has the structure and the mandate to effectively partner with these institutions and with the private sector. For instance, some national development agencies—in the U.K., the U.S., and Germany, for example—have established funds or development finance institutions specifically to support their private sector development efforts.
Finally, six, directly engage in building basic financial infrastructure: property rights, secure transaction laws, collateral rights, credit bureaus, small and medium enterprise tool kits, financial literacy, regional regulatory harmonization, and financial regulation.
I believe that Scotiabank’s history and our deep commitment to the development of emerging markets, including our recent inclusive business successes, put us in a unique position to offer our insights on this matter. I hope these recommendations are helpful to you in your deliberations.
I’ll be very pleased to answer any questions you may have.
Thank you for your question.
Scotiabank's involvement in microfinance started when we purchased a bank in Peru. Peru is the most developed country in terms of microfinance, with a long, long history. As we've built the microfinance business inside Scotiabank, we've used the Peruvian model to expand to the Dominican Republic, Haiti, Chile, and other markets.
I just spoke at the University of Ottawa before coming here, and some of the students asked how microfinance works; does it look like traditional banking? I explained that as a Canadian with 25 years of banking experience in Canada, two years ago going to Peru and seeing our microfinance business for the first time was quite enlightening for me too. I am fascinated by the opportunities it provides to allow entrepreneurs to provide a living for families and create jobs.
The way microfinance works is quite different from what we would know as branch banking. In our case, our officers travel by motorcycle to the communities where customers live and work. They go with pen and paper, and they will actually have a discussion with the business owner about who they're selling to, how much their sales are, how much they are paying in supplies, how much the utilities are. Financial statements aren't common in this business, so the officer actually has to figure out how much this business makes and how much they can afford to pay. Based on that knowledge, they'll make a decision around the lending criteria.
That same officer is also responsible for collecting the loans. So on another day they'll go back on their motorcycle to the community to collect as well. Obviously we don't condone or engage in any kind of predatory collection practices.
We have a very, very large distribution network of branches and kiosks in retail stores and a number of non-traditional distribution outlets that we'd be used to here in Canada—places where people can go to make their payments. We make it very easy for them to find an outlet to make a payment.
Not to belabour it, but the business that is fascinating to me and is going to transform the world is the mobile bank—the bank that's held in a cellphone. Increasingly we will be able to distribute loans onto the phone, and people will be able to make payments, again, through these distribution outlets, through the phones.
We always joke that we had a branch in Jamaica long before we had one in Toronto. We started as a bank that was financing trade between the east coast and the Caribbean. That's our history. That's our route. We have 120-plus years of experience in developing markets.
Then about 30 years ago we had an opportunity to enter the Mexican market, and some visionary CEOs looked at doing that.
We do a lot of homework and a lot of due diligence before we enter a market. Obviously we are looking at stability of political systems, level of corruption. All those kinds of things have to meet our criteria or we don't enter a market.
After that, if we decide to enter a market, usually it's by acquisition. Then we look at the quality and culture of the company and whether it fits with our culture. If we don't end up with the same values and culture, regardless of whether the company is profitable or not, it's not going to be a good fit.
There's an awful lot of due diligence that's done before we think about entering a market. In our case we've built an expertise in Latin America. There's been a long history in the Caribbean, and now we have a history in Latin America—from Mexico to Peru to Chile, to Colombia last year, Brazil, and Uruguay.
We have a core competency in Spanish now. All of us in head office are learning Spanish as well. Over half of Scotiabank's employees speak Spanish as their first and usually only language, and we have some core competency in Latin American culture.
I was asked at the university why we aren't in Africa, and it's that it takes a massive amount of time, energy, and management attention to learn a market and a culture. For us, it's been Latin America, the Caribbean, and Asia, outside of Canada.
Sorry. That was a long answer to your question.
I want to thank you for the opportunity to be with you this afternoon. I will keep my comments short and I will be pleased to answer any questions you may have after.
It has now been almost a year since I took on my new responsibilities as foreign minister.
I last appeared before you in December, and since then many situations around the world have changed, and changed dramatically.
The situation in Syria is of great concern to us all. Canada acted swiftly in condemning the Assad regime's violent attacks against the Syrian people. We imposed a series of sanctions directed at Syria's rulers and their funding sources.
We have also activated a voluntary evacuation of Canadians in Syria, where we have facilitated the departure of literally hundreds of Canadians. During that time, in the month or so to follow, our ambassador stayed in place while the staff was scaled down. The safety of our embassy staff was paramount in our decision to continue operations. Last week we felt the security situation had escalated to a point where we could no longer be comfortable with keeping our staff in Damascus.
The international community continues to stand united with the Syrian people, and while a select few countries chose to obstruct substantial progress in international forums, the Friends of the Syrian People group will be a key forum to delve into the situation even further.
I hope to be travelling to the second of these meetings very shortly.
Make no mistake about it, those who chose to obstruct a resolution on Syria will have the blood of the Syrian people on their hands, and history will be their judge.
In that general neighbourhood, Iran continues to pose a significant threat to not just the region but indeed to the entire planet. I can quell the concerns of the committee by unequivocally stating it is our fundamental belief that every peaceful, diplomatic measure must be taken in this affair.
Sanctions are beginning to have a real effect in the country, and the international community needs to redouble its efforts in this regard.
Our responsibility as parliamentarians and my role as Minister of Foreign Affairs is to represent Canada's fundamental values of freedom, democracy, human rights and the rule of law. We keep these values in mind when judging all situations we are faced with. That will always be the case.
For those who balk at sanctions as a weak tool of change, I can only point to my latest travels. The transformations in Burma are something about which we are all cautiously optimistic. Though we await further reforms by the Burmese government as well as the results of byelections in April, we can't help but be struck by what we are seeing. I urge Burma's president to continue on this course and continue that dialogue with his foreign minister, but I'm also pleased to say that I brought several books detailing our parliamentary democracy at the request of Burma's Speaker.
I am proud to have had the opportunity to be the first Canadian foreign minister to visit Burma, and I must give this committee my assessment of Aung San Suu Kyi. This may be one of the most impressive individuals who I have met in my 15 years in public life. Her commitment to the Burmese people is unwavering and her determination to make a more inclusive, free society is relentless. I am very proud to have presented her with her honorary Canadian citizenship on behalf of the House of Commons and the Government of Canada, which voted unanimously to grant it to her, so thank you.
In closing, I remember my committee appearance last December when I told the committee that Foreign Affairs is becoming more and more an economic portfolio.
As minister, I consider the situation in light of our values but also of our economic interests. We have noticed that these interests are favourably regarded worldwide. The Prime Minister accomplished great things in China, all over the ASEAN area and in Latin America. Canadians can be proud of these accomplishments.
Trade diversification is crucial to our future prosperity. Laying the foundation for these economic programs is largely about the relationships we build. That is fundamental, and that is what I have been striving to achieve.
Laying the foundation for this economic progress is largely about the relationships we build. That is fundamental, and that is what I have been striving to achieve.
Let me finish by saying that almost everyone around this committee table has taken me up on my previous offer for briefings from Foreign Affairs officials. I continue to extend that invitation, now and on an ongoing basis.
I continue to look forward to our solid working relationship. I think we give Canadians hope when they see us working together on this important policy area. My door is always open.
With that, I'm happy to turn it over to my colleague.
Thank you, Mr. Chairman. It is good to be here.
I was in opposition for thirteen years, so I know what that's like. One of the things about being in this position is that I do miss being on committees and interfacing with all of our colleagues from all parties. It's good to be here and to have an opportunity to do that today.
Minister Baird has asked me to support him in two areas: the Americas and consular affairs. I'll begin with a brief overview of our engagement in the Americas.
You're aware, I'm sure, that Prime Minister Harper made the Americas a foreign policy priority in 2007. Four years later I believe we are dynamically engaged and dedicated to a more prosperous, secure, and democratic hemisphere. There have been more than 150 high-level Canadian visits to the region throughout the past four years, including Prime Minister Harper's most recent visit this August. We have more free trade agreements in the Americas than in any other region in the world.
Increasing economic opportunity, though, requires peace and stability. Security and governance challenges in the region pose a direct and indirect threat, not only to residents of the area but to Canada and Canadian interests. We've invested nearly $2 billion in the last three years to improve security and strengthen democratic institutions in the region, through international assistance, multilateral contributions, and security-focused programming.
I think it's important to emphasize, because we're just starting to realize this in the broader Canadian public, that the Americas present tremendous opportunities for Canadians. Our renewed engagement focuses on expanding our commercial and investment ties, as Minister Baird said, with the world, and, in the Americas case, with Brazil especially, and with our existing FTA partners. We want to ensure that Canadian companies benefit from the agreements that have been put together with our partners in the Americas.
We are also planning to build on our multilateral hemispheric efforts to combat transnational organized crime. Our government will continue to support our neighbours to strengthen institutions and build capacity for stability and growth, while sharing our best practices and promoting Canadian values.
I can say from travelling around, and I know Minister Baird will say the same, that the respect for Canada is unbelievable. It's very striking. One of the highlights of this portfolio is to see how well regarded Canada is in the Americas, and I believe around the world.
Colleagues, we're very committed to the Organization of American States. It is the primary multilateral organization in the hemisphere, and it's the only one of which Canada is a member. Our contributions to the Americas come from across government—a whole host of departments, agencies, and crown corporations.
My other mandate is consular affairs. You may know that our government was the very first government to explicitly designate a minister responsible for this area.
Canadians love to travel. In 2010, Canadians made more than 56 million trips out of the country. The vast majority of these trips go off without a hitch, but even with the best preparations, some Canadians do encounter difficulties.
Last year alone, in 2011, more than 228,000 consular cases were opened. Of these, more than 6,700 were distress-related cases. Those included arrest, detentions, deaths, and medical emergencies.
Some consular cases garner considerable public attention, and some of you have been assisted in that, shall we say. But these actually represent less than 1% of the cases that are handled by consular officials across the world.
I should also point out that the past 18 months have really tested our capacity to help our fellow Canadians. There have been some 50 international crises, in 36 countries, in the last year and a half alone. These include crises in Egypt, Libya, and Japan, as well as our voluntary evacuation in Syria, to which Minister Baird just referred.
There is something very helpful that has occurred with respect to these, and that is the recent opening of the Emergency Watch and Response Centre at the Foreign Affairs building here in Ottawa.
Mr. Chairman, your committee might want to take the opportunity to tour this facility. It's state-of-the-art. Before, people who were dealing with evacuations and crises were in the basement, all crammed together. This allows a state-of-the-art facility, which is very impressive.
The centre provides a platform for a coordinated whole-of-government response to emergencies abroad. It's equipped to host not only emergency workers from DFAIT but other federal partner organizations, such as Citizenship and Immigration.
Mr. Chairman, colleagues have conducted outreach activities across Canada and will continue to do that. The purpose of this is to raise awareness of consular services. We want to better ensure that Canadians have the knowledge they need to make informed and responsible decisions before going abroad. At the end of the day, no one else can keep you safe. It's really up to you and the decisions you make.
We have held discussions with stakeholders in the travel industry and with academic institutions. I believe we're building very helpful partnerships that will assist us in providing useful information and advice to travellers and promote a message of prevention.
More than three million Canadians go to Mexico, Cuba, and the Dominican Republic each and every year. We have met with those countries' top government officials on people-to-people issues that are important to Canadian travellers. We feel that building these relationships will help to address systemic consular irritants. It has already proven to contribute to resolution of specific cases.
This type of international engagement has been the first ever preventative citizen-focused outreach, providing a tangible demonstration that the Canadian government does care and is very interested in the safety of Canadians travelling abroad.
Again, I thank you for the opportunity to be here today. Many of you have spoken to me or my office about cases of particular concern to you.
We welcome your questions at this time.
It's a very difficult area because these are distressing cases. There’s a lot of very strong emotion and grief when these abductions occur.
I don't know if you're aware, Minister Baird, but Lois has become a little bit of a go-to person in her area because she's developed some expertise and some real depth in dealing with these cases. I know other committee members may have experiences as well.
The first actor to get involved is always the province, because child custody orders are provincial orders in family courts. They generally will call in the OPP or local law enforcement, who often work with NGOs such as Child Find and other actors that provide support and expertise.
The Government of Canada is often asked to go and get the child and bring them back because the parent has a custody order and feels that somebody should enforce it, and they look to the government to do that. But that simply is not something the federal government is able to do. We have to work through the existing legal framework, both in our country and in the country to which the child is taken.
Many countries have signed what's called the Hague Convention, which is something Canada has been promoting. The Hague Convention essentially says that the child's custody should be decided by the country of their ordinary residence. That's been very helpful because it's kind of a quick and clear litmus test on which country has jurisdiction. We often claim the Hague Convention in asking for children to be returned to Canada.
Where it gets complicated is often these child abduction cases involve children with dual citizenship. Often we find that the country of other citizenship is very reluctant to cede to Canada their sovereignty over the child, even though the child also has Canadian citizenship. So there are appeals to the other court to ask that the Hague Convention be overridden in that case. These can be very complex legal cases, and generally are as a matter of fact.
There are a few things parents can do if they think this is going to be an issue for them and their children. One is that they can put the child on the Passport Canada's security list. The child's name is then flagged so that if the child is travelling under a Canadian passport or if the parent who intends to abduct tries to get a passport for the child, then the flag comes up and both parents will be consulted. There's some protocol to ensure that there's consent from all the players.
It helps for a parent to have a notarized consent letter when the child is travelling because that helps border officials sort out whether they should be concerned or whether they should be asking more questions. It's something also that our consular officials in other countries should be made aware of. So if you think your child might be taken to another country, just notify our mission there. We'll help them to be aware of the issue and to work with local officials, if in fact the problem develops.
But there are publications available on the travel.gc.ca website to assist parents in these heartbreaking situations. Parents should also be aware that in Muslim countries, strong preference is given to the father. In fact, a child in those countries cannot legally leave the country without the father's consent. That's another area.
We are working to get information about this widely disseminated. We had a briefing for members of Parliament and senators last week. Some of you were there. Knowledge is to some degree I think helpful for people, but the bottom line is that there are no quick fixes, so the care and concern of members of Parliament like you give a great deal of comfort and support to parents in these difficult situations.