We'll call this morning's meeting to order.
We want to thank both of our organizations for being with us today. We're here for our 41st meeting of the Standing Committee on Aboriginal Affairs and Northern Development, under our study on access to capital.
We have with us this morning, the Business Development Bank of Canada, Mr. Robert Lajoie, the vice-president, financing and consulting for Manitoba, and national director for aboriginal banking; and Mr. John Connell, vice-president of government relations. We also have the First Nations Lands Advisory Board, Chief Austin Bear, who is a director and with the Muskoday First Nation in Saskatchewan; and William McCue, director, and a councillor from Georgina Island in Ontario.
We've had a little pre-consultation, and, Chief Bear, I believe you're going to do the first presentation on behalf of the First Nations Land Advisory Board. You have 10 minutes for your opening remarks. Then we'll have opening remarks from the Business Development Bank, and then we will turn it to members for questions.
Chief Bear, the floor is yours for the next 10 minutes.
Good morning, Chairman Richards and honourable members of the committee.
Just briefly, I was introduced, of course and you heard my name as Austin Bear. I'm the chief of the Muskoday Cree nation, Treaty 6, in what is now the province of Saskatchewan. Our community is only a few kilometres from the city of Prince Albert.
Thank you, Mr. Chair and the committee, for inviting our organization here this morning and this opportunity to share the activities, the developments of first nations across the country.
On behalf of the First Nations Lands Advisory Board, I want to thank you sincerely for the opportunity to speak to you today about the Framework Agreement on First Nations Land Management and our experiences with vastly improved access to capital. As the majority, if not all, first nations communities can attest to, the Indian Act has been most devastating to our communities economically, culturally, and socially. At the root of this dysfunctional piece of legislation is the complete lack of recognition and respect for first nations as governments, governments that are certainly capable of competent decision-making.
Add to this a complete lack of land certainty, serious environmental legacy issues, unclear survey fabric and boundary issues, a land registry that isn't backed by formal regulation, and an inefficient system of bureaucracy, based on a 100-year-old statute. It becomes quite easy to see why the situation creates many problems.
My colleagues and I are part of a growing group of first nations who, in the 1990s, had enough of federal government dependency and waiting around for things to get better. We negotiated and signed an agreement with Canada in 1996 that would provide us with some greatly needed relief from some of the most offensive and paternalistic sections of the Indian Act.
The framework agreement is, first, a recognition that our communities are governments with legislative and management authorities over our lands and resources. Land, as you will likely know, is inextricably linked to our cultures and our identities. The framework agreement is an expression of the inherent right of self-government. We believe that the authority of government flows from the Creator, not the Minister of Aboriginal Affairs.
While this might seem to be a mundane attribute, it is considered to be a basic respect, which is the core of our government systems. It lies at the base of our cultures. As a primary tenet of the framework agreement, it has translated to concrete, measurable, and proven advances for our communities over life under the shadow of the Indian Act.
Economic development and increased access to capital have been major benefits to many of our signatory first nations. For a community that has decided to opt into the framework agreement, decisions can be made in a matter of days and weeks, as opposed to months, years, or never, under the Indian Act. This means the virtual elimination of unnecessary land transaction costs defined in time and other tangible expenses. It also reduces or eliminates countless missed opportunities due to these same delays.
Clear legal status and capacity of first nations governments to acquire and hold property, to borrow and contract, to expend and invest money, and to be a party to legal proceedings: first nations under the Indian Act do not hold these clear rights. This discourages lenders and other financing partners.
A land registry that is regulation backed, paperless, electronic, and provides for instant registration, we developed this in cooperation with key representatives from the finance community as well as the Government of Canada. Not only have key financial institutions taken notice of these improvements, but so have third party investors and the insurance industry. For the first time it is possible to get title insurance on reserve lands. All of these attributes were made possible without having to risk the loss of our reserve lands.
The KPMG consulting firm has concluded three separate studies of first nations that are operating under their land codes and has found that framework agreement first nations are able to complete transactions more efficiently than Canada. Framework agreement first nations can do the job for less cost than Canada. Framework agreement first nations are increasing the average annual number of land transactions by a 9% rate as opposed to transactions by first nations under the Indian Act, which are decreasing on an average of 1%.
The framework agreement provides better circumstances for first nations to improve their land governance systems and processes, such as governance and decision-making, and the facilitation of market opportunities. Also, the framework agreement is impacting economic development efforts on reserve lands. The framework agreement has contributed to first nations' increasing the number of businesses on reserves, with most new businesses being first nation member-owned businesses, which shows increased entrepreneurial activity.
The framework agreement first nations are expanding their business development to new and/or different industry areas with new partners. Framework agreement first nations are beginning to see a shift in the quality of jobs available on reserve by providing jobs that require higher levels of education and specialized training. Over the past while, at least 2,000 jobs have been created by first nations people in first nations communities.
Framework agreement first nations have experienced increasing internal and external investment in their communities, $101 million in investment approximately, as identified by a sample of only 17 framework agreement first nations. Additionally, this investment occurred in more areas than before: hard and soft infrastructure, business regeneration, and growth and new businesses.
It is worth noting that all of these benefits have also meant tremendous ongoing work and the overcoming of significant challenges, but not one first nation that has implemented the framework agreement has indicated that they would like to give up and go back to the Indian Act, not a single one of the 54 or 55 operational first nations, nor the 112 signatories to the framework agreement.
Of course, we would be happy to answer any questions.
Thank you, sir.
Thank you, committee members.
Mr. Chair and distinguished members of the committee, thank you for inviting me to join you today to support your study on access to capital, and to tell you about the support provided by the Business Development Bank of Canada, or BDC, to aboriginal entrepreneurs.
As the BDC's national director of aboriginal banking, I manage a dedicated and passionate team that serves one of the most complex, dynamic and fastest growing markets in the country.
For those who may be less familiar with BDC, I will first provide you with some general information on its activities in support of Canadian entrepreneurs. I will then focus on our aboriginal banking unit, or ABU.
Let me begin by reminding you that BDC is the only bank in Canada dedicated exclusively to meeting the needs of entrepreneurs, with a focus on small and medium-sized enterprises. As a complementary lender, we have a greater appetite for risk than other financial institutions and we price accordingly. However, we're not the lender of last resort. Indeed, as per Treasury Board guidelines BDC must be financially sustainable. BDC does not receive government appropriations to run its daily operations. In fact, the bank has paid dividends to the Government of Canada since 1997.
We are proud to help over 30,000 Canadian SMEs that employ 674,000 Canadians and generate $192 billion in revenue annually.
Approximately 15% of our clients, or 5,000, are exporters. Our services include financing and growth and transition capital, formerly known as subordinate financing. We also offer affordable consulting services and are the largest institutional venture capital investor in Canada. Of our 30,000 clients, approximately 1.25%, or 378 clients, are aboriginal, representing $184 million in assets.
I would like to take a few moments to tell you about our team. The ABU stretches across Canada and is made up of nine dynamic individuals with over 55 cumulative years of service. Our team is committed to giving back. Members participate in 13 volunteer positions in their communities. While located in six offices across the country, we partner with aboriginal financial institutions and more than 100 BDC business centres across Canada.
The goal of BDC's aboriginal banking is to accelerate the success of aboriginal entrepreneurs by providing them with the tailored support that they need. In addition to flexible financing solutions and affordable advisory services, ABU has developed growth capital for aboriginal business, the aboriginal business development fund, and the E-Spirit national aboriginal youth business plan competition .
Not only does the ABU deliver unique services; it delivers them in a way that respects aboriginal culture and understands the unique challenges aboriginal businesses face. In fact, I myself am Métis, and several of the members of our growing team are aboriginal.
Aboriginal entrepreneurs rely mostly on personal savings to start up their businesses and even to finance ongoing operations. Well aware of this reality, BDC seeks to increase access to capital for aboriginal entrepreneurs, with commercially viable businesses located on or off reserve through its flexible financing solutions.
With growth capital for aboriginal business, aboriginal entrepreneurs on or off reserve can apply for up to $25,000 for their start-up business or up to $100,000 for their existing business. This is in addition to being able to access other BDC loans to top up their financial requirements. There are no application or annual fees. The debt-to-equity ratio of the business we support can be up to 4:1 debt equity, as distinct from our regular 3:1 debt equity. We refund a portion of the interest paid on the loan to the community under a special provision.
As you have heard from some of the other witnesses who have appeared in the context of this study, aboriginal entrepreneurs on reserve cannot leverage their lands and assets as collateral, as per section 89 of the Indian Act. Given this challenge, BDC provides financing on reserve primarily through loans made to corporations.
This is done to simplify the enforcement process, because we cannot seize or sell assets that belong to band members. When real estate is involved, we rely on mortgage of lease to secure our loans and we obtain a band council resolution to ensure that we have access to the band lands in the event of default.
When financing first nations projects, we work closely with other lenders, such as chartered banks, credit unions, and aboriginal financial institutions, in order to extend capital to aboriginal entrepreneurs. We satisfy our mandate as a complementary lender by taking more risk on projects that we finance and by partnering with other lenders when there is a funding shortfall on their projects. By doing so, we provide funding when it might otherwise not be available and we reduce other lenders' exposure to risk. By working with AFIs, we help them touch more entrepreneurs and extend more capital.
Our aboriginal business development fund provides microcredit lending for aboriginal entrepreneurs. These microloans of $2,000 to $20,000 are made available through grassroots aboriginal organizations across Canada, such as the Nuu-chah-nulth Economic Development Corporation in British Columbia. These loans are coupled with management skills training and ongoing mentorship.
This fund was created as a result of aboriginal entrepreneurs reporting the need for business management mentoring. This initiative increases access to capital for aboriginal entrepreneurs who would not normally qualify for a loan. In addition, the training and mentorship elements greatly benefit the community and create entrepreneurial capacity within it. The ABDF serves as a business model for other communities as well.
Our ABU also seeks to create awareness in the marketplace, especially amongst aboriginal youth. As you have heard from other witnesses, building business skills and awareness of self-employment opportunities is key to the economic success of first nation communities.
In order to reach aboriginal youth, we have our E-Spirit business plan competition. It is Internet-based, allowing us to reach youth in remote areas, and includes online modules, mentoring, and business plan preparation. The program incorporates both mentorship and elder components. Schools can also receive a computer to access online resources.
E-Spirit teams must submit a complete business plan and a video promoting their business idea. The winners take away cash prizes in the amounts of $4,000 for gold, $2,000 for silver, and $1,000 for bronze. In addition, special recognition awards are given for the best in various categories. E-Spirit helps aboriginal youth develop business and management skills and increases overall entrepreneurial awareness. To date, we have reached more than 6,500 grade 10 to grade 12 students through this program.
To conclude, I will again say that we are committed to making the most of the potential of aboriginal SMEs. We are working to ensure that they have all the tools and support they need to succeed. With the aboriginal banking team, our priorities are to improve the client experience and expand our reach and visibility. We are building our team and further developing our skills and our knowledge, which are unique in this field, to better serve aboriginal entrepreneurs and support their growth.
Thank you for your attention. We would be pleased to answer your questions.
The Indian Act on land management and the obstacles and barriers found in that sector are complicated further, or enhanced further, by just what you mentioned.
First nations, and I'll speak of my own, need greater capacity in education and training. We have students who wish to go to university for post-secondary education. In each given year, the funding available provides for perhaps 60% of those who are post-secondary eligible and post-secondary ready.
The other part, of course, is training and employment opportunities, vocational and in the trades. There is a lack of resources and support, not only from federal opportunities and responsibilities. It is also evident in the provinces. The province is creating opportunities for first nations and aboriginal peoples.
Capacity building, good governance building, financial planning, land use planning, which is most important in the best use of land and in land creating opportunities to generate revenue—much still has to be done in those areas.
Thank you for the opportunity. As I said, our community was fortunate within the lands management to increase its revenues by having the opportunity to develop our lands. Further to that, the access.... How we could improve always is through increased funding, whether it be by partnership with government or increased funding for the infrastructure dollars we do need for our own communities.
We do use our own-source revenue. We are presently doing it right now for something that is very important to us and that's our water system. It has been antiquated for quite some time, and we've been trying to negotiate with the Department of Indian Affairs to access capital to redo our system. Unfortunately, our community, like others, is on a long waiting list for capital expenditures in the priorities, we're below the folks who don't have water, understandably. Even though we have a boil water advisory, we're down the list even though it's a need.
Having to borrow funds or use the own-source revenue funds that we derive to fix the infrastructure in our community takes away from other avenues of priorities such as education. As I said, from our lease fundings and our own-source revenue, we do fund areas of post-secondary education. I think our post-secondary is 80% to 85%. We try to fund as much as we can with our own-source revenue for what we can't get from INAC.
I think it's a partnership that is needed with financial institutions. It's good to hear our friends announce these programs. That's news to me, and it sounds like a very exciting program that I am going to take back to our council. I think if we can have an increased commitment from Canada to help with priorities of infrastructure through the capital or the access to the action plan, it would free up opportunities for first nations to move even further and want to be in the economy. We don't want to continually have to go to other sources to govern. We should be self-governing. This is what we're trying to do and having lands management helps us create that.
Austin, do you want to add anything else? Thank you.
Thank you very much, Mr. Chair.
Thank you to our witnesses for being here this morning. These are certainly interesting discussions. Of course, we talked about section 89 and the restrictions that are involved there.
Mr. Lajoie, you spoke about mortgages of lease and access to land. Of course, those all tie into the same issue. You said that in order to make the deals that you needed, you had to look for band resolution. Therefore, we see how this interaction takes place. You also talked about the situation that can occur as far as the default is concerned. I'm wondering, first of all, if you could talk to us about the consequences for a company that goes through that particular process when they have defaulted.
Then perhaps, Chief Bear, you could speak from the other side, as far as the band is concerned, about the consequences when there's a default on a loan in a community.
Perhaps, Robert, you wouldn't mind starting on that.
Of course, section 89 of the Indian Act no longer applies to my first nation.
Mr. Earl Dreeshen: Yes.
Chief Austin Bear: However, if it's an opportunity where the member wishes to acquire a mortgage for a home, the member is granted a registered interest in the land. The interest can be mortgaged—not the land itself, because the title doesn't remain with our first nation, but the registered leasehold interest can be mortgaged.
Now it's the same with the entrepreneurial. If it's agriculture, there are individuals who hold interests in the land by leasehold interest. They're long-term interests, and those interests can be mortgaged to the bank. The security of the bank will take the revenue generated on that interest. If they have to default, they would manage that by, upon agreement, claiming the revenue from the land.
If all else fails, we don't rely anymore on, if they even exist, ministerial guarantees. If necessary, if it's a mortgage for a home, the Muskoday First Nation will guarantee that loan, or for lack of a better term, perhaps underwrite that loan. If the homeowner, the member, defaults, we will satisfy the requirements on the mortgage and we will take possession of that home. We will either sell it to another member or turn it into social housing. Those are the opportunities created.
For small business for members, it's basically the same. We can provide for securing small business loans for entrepreneurs. We're going through a few of those now. Those are the opportunities that are provided. To satisfy the bank, or the lenders, we still provide a band council resolution. That's the strongest decision you can get from chief and council, so we still provide that. It's not an Indian Act band council resolution. We don't even like to call them band council resolutions anymore. We call them land resolutions.
Thank you for the question.
On the education side, we create awareness through E-Spirit, and we hope that we have a part in helping them believe they can have a future in entrepreneurship.
I have an example of a young entrepreneur. She left her community to work in a metropolitan centre. She wanted to go back and then she wanted to buy a business. There was an opportunity to buy a motel just outside her first nation, so we worked closely with the AFI of the region and the purchase price was $300,000. She had very limited equity. Her first nation gave her part of the equity. The AFI gave her another part of the equity, and we were able to fund $180,000 of the $300,000 with a first mortgage.
A young entrepreneur, first nations, wanting to return to her community, no historical entrepreneurship, some education—we saw that as a risk in terms of experience, but a risk we were willing to take because of the willingness to go to work in her community and support community growth. This is an example of supporting a young entrepreneur with very little experience, and then we'll keep on supporting her if she wants to grow that company. We can offer it through our consulting services, mentorship, coaching, and help her build. That's one example.
Maybe she'll become a role model for other youth in the community. So it's one entrepreneur at a time. It's creating awareness through E-Spirit and hoping that the students are aware that they can have a future in entrepreneurship. Then it's also supporting the youth when they approach us for projects.
We really appreciate all the feedback we have received today. I would say particularly the experience from you, Chief Bear and Mr. McCue, in terms of the on-the-ground reality that first nations face, the barriers they face, and the opportunities that are ahead of them.
In terms of a more general question, and I could ask this of all of you, how important is it that we get this right and that we get this right now? I know that in Manitoba and Saskatchewan the demographics are such that indigenous peoples are a significant part of our provinces population-wise, but whether you look at it where we are or across the country, it's aboriginal communities that are growing the fastest and that have the highest numbers of young people. Obviously, a lot of responsibility comes with that on behalf of those who make decisions, who can make or break these young people's futures.
I am wondering if you could speak to that sense of urgency, whether it's in terms of moving forward on the FNLMA, or in terms of investments in education and training, housing, or the treaty relationship, and how seriously we need to take these matters as parliamentarians, obviously with the government here as well. I am wondering if you could speak to that. Perhaps you would like to begin, Chief Bear.
That's a very good question and an excellent point. It is critical and absolutely necessary, particularly at this time in our history and in the continued building of the nation of Canada, but more importantly, with first nations being an integral partner, participant, and beneficiary of Canada's building and securing of our nation.
We can no longer support and be silent about the hundreds of millions of dollars government spends on social assistance and corrections, the majority of which is to care for first nations people in the most negative context that one could believe and understand. We need to turn those hundreds of millions of dollars into opportunity, into recognition that first nations people are very integral in the founding and the building of Canada, our nation, and shouldn't be left marginally to waste away on the sidelines.
This is what we have to impress upon parliamentarians, committees such as yours, the different parties of government that sit in that big house, and Canadians all across this nation. This is where we have to make that most relevant when we're asked, “What can we do?” and “What's the urgency?” This is what we can do, and the urgency is now.