First Nations Bank of Canada, a chartered national bank that is majority-owned by Indigenous shareholders, has formed a joint venture with the Canadian government’s Business Development Bank to increase business ownership in Canada’s Indigenous communities.
The banks are targeting the wave of retiring Canadian business owners, who are sitting on roughly $2 trillion in business wealth and mostly lack successors and exit plans (see, “Hands Off: Investing in employee ownership can ensure Canadian businesses stay Canadian”).
First Nations Bank will issue loans of $5 million, on average, for Indigenous economic development agencies and other community-based organizations to acquire small and mid-sized Canadian businesses. Business Development Bank’s C$100 million ($73 million) will guarantee the loans and cover up to 85% of default risks.
Returns on inclusion
Business Development Bank’s Isabelle Hudon said the initiative “is a great example of a common desire to take action towards economic reconciliation can lead to concrete business deals that benefit all players.”
Canada’s Indigenous entrepreneurs, like their southern neighbors in the US, have faced systemic challenges, primarily around access to capital.
Indigenous entrepreneurs are one of the fastest-growing groups of business owners in Canada and supporting their growth could add 1.5% in value annually to Canada’s GDP, according to Business Development Bank.
Economic development
First Nations will underwrite loans to acquire business in manufacturing, service and retail, natural resources and energy, and hospitality “with strong track records,” said First Nation Bank’s Bill Lomax.
The economic development agency and other community borrowers will facilitate ownership of the businesses to individual Indigenous entrepreneurs.
“With Indigenous ownership, the companies will be more competitive for many reasons including procurement policies that favor Indigenous-owned businesses.”
