Economic Reconciliation Roundtable: reflections and synthesis

Access to capital

A contrast was drawn between the availability of capital in Canada and the persistent barriers faced by Indigenous communities, groups, and businesses to access it. Below is a high-level summary of considerations participants raised during this discussion:

• There are significant actions that can be taken "beyond Ottawa"; while government plays an important role, there are opportunities for the private sector to take on a greater role in responding to these challenges.
• While there are barriers for access to large sums of capital, this conversation should not neglect capital needs for small and medium-sized projects, nor challenges faced by small and medium-sized Indigenous businesses. Similar capacity needs and challenges with relationship building with financial institutions exist. Not every community may have an interest in starting a major project but may still have financing needs to achieve their economic goals.
• The current investment vehicles are being forced into a trust structure that was not built or intended for the benefit of thousands of beneficiaries.
• Indigenous governments do not have the same access to public or private capital as other levels of government. They do not receive the "wholesale" benefits typically offered to these institutions.
• Indigenous governments should have the ability to issue debt and generate a credit rating (similar to the abilities of the First Nations Finance Authority).
• The existing financial framework in Canada does not support the financial success of Indigenous people. Indigenous people are unable to access economic opportunities because of the regulatory barriers and bureaucratic hurdles.

Barriers to giving capital

Lenders face barriers when attempting to make capital more accessible to borrowers. The following are examples of challenges that were referenced throughout the discussion:

• Timely accounting services: lenders require timely access to a potential borrower's financial statements. In many cases, Indigenous borrowers face barriers while trying to respond accordingly. Indigenous governments, entrepreneurs, and/or businesses do not always have the capacity to respond accordingly and are unable to access timely accounting services due to systemic discrimination and barriers.
• Insuring interests: the multiple land registry systems which govern First Nations lands create significant barriers for insurers and often result in a high premium, which prevents access to affordable capital.
• Land Tenures: First Nations operate under various types of land tenure systems (e.g. Indian Act, Land Code, Custom Code). It takes time and capacity from the side of the financial institution to review, understand and work within the confines of the existing system.
• Trustee Responsibilities: when a financial institution acts as a trustee of Indigenous funds, there are significant legal liabilities that limit the ability to be creative or innovative in this space. This has the effect of making calls for change difficult to address. The Indian Act also creates higher risks for financial institutions when loaning to Indigenous Peoples, particularly for mortgages for on-reserve individuals due to the lack of collateral.

Assessing risk

There were many references to the concept of risk in the context of providing affordable capital to Indigenous borrowers. Specifically, questions were raised about how financial institutions consider risk and whether it is being reasonably assessed. There was limited opportunity for elaboration or debate on potential solutions; this topic may be raised in more detail in subsequent meetings. The following questions were raised during the discussion:

• Is risk being appropriately priced and understood by the private sector?
• Are there lessons that are transferable from government partnerships (e.g. Canadian Infrastructure Bank) to the private sector?
• Are there models of partnerships that lower the risk profile for borrowers (for example, equity partnerships, loan backing)?
  • Can these models be adapted or replicated across the private sector?

Indigenous financial institutions

The importance of Indigenous-led economic and financial institutions was raised repeatedly. First Nations Fiscal Management Act institutions were cited as models for future institutions. The following points were raised by participants on this topic:

• There is a need for distinctions-based institutions supporting Métis and Inuit interests.
• There is a need for continued or additional support from the government to support the mandates of existing Indigenous financial institutions (for example, the recapitalization of financial institutions).
• There is a need to amplify solutions led by Indigenous institutions, instead of relying on ideas that have not worked thus far.
• An Indigenous Development Bank (IDB) is a compelling proposal that received support from a number of participants. It was noted that there are significant time and transaction costs when seeking capital through federal programs and that an IDB could expedite this process, while meeting key capital needs.

Capacity building

The need for capacity support in Indigenous communities was one of the most prominent barriers highlighted in the discussion, as many Indigenous communities lack the capacity to lead or participate in economic development projects that interest them. For this reason, many of the topics included in this paper, and proposed solutions and ideas, directly responded to the need to build capacity. Participants emphasized the extent of the issue, highlighting its impact on decision making and noting that many impactful initiatives will never reach their full potential because communities do not have the capacity to participate in them. The discussion included a recommendation for capacity to be considered in the development of the Indigenous Loan Guarantee Program.

Infrastructure

The infrastructure gap was one of the most prominent barriers to economic development cited throughout the roundtable and there was a general consensus that the current approach to infrastructure funding requires transformation. There was a call to look at infrastructure through the Seven Generations Principle. Many of the projects needed are significant in scale and the full scope of their impact may not be realized for decades to come. Certain specific needs and ideas were raised, including a call for increased access to financial institution branches in remote and northern regions, increased road access, and the establishment of an Indigenous Investment Commission to aggregate funding to invest in larger projects and provide oversight and capacity supports. There were multiple mentions of a need for an Indigenous investment vehicle to build infrastructure.

Participation in major projects

Multiple participants mentioned the desire for equity ownership in natural resource projects. One of the most prominent points was that each unique partnership may be in pursuit of a different outcome. Specifically, some communities may be seeking financial benefits, while others may be seeking control over environmental impacts and protection. Some groups may be looking to foster employment and skills, while others may be looking for governance representation or ownership. Further, it is important to note that how these concepts are defined and envisioned may differ between communities. Therefore, it is important that partnership development includes establishing a shared understanding of what meaningful representation looks like in the particular context.

Indigenous representation in the financial sector

Indigenous representation in the Financial Sector was a common discussion topic. There was a shared sentiment that when Indigenous people garner experience in the financial sector, they will often return to their community to share and apply that knowledge. It was expressed that there is a need for Indigenous people not only in entry level positions, but at all governance levels in financial institutions, especially the executive level. Multiple participants shared their experiences navigating these systems, and the barriers they faced in that process.

Participants noted that some promising Indigenous candidates will decline opportunities in the financial sector when they are required to work off-reserve and leave their communities. First Nations individuals face disincentives to accepting similarly paid positions off reserve. While participants were sympathetic, they also noted that in-office environments can be essential to professional development. Despite attempts at accommodations, participants noted that Indigenous employees can miss out on significant opportunities for development when they are not learning in an office environment, which has the power to shape the growth of Indigenous youth who are just beginning their careers.

Existing government initiatives and regulations

The following needs were raised in response to existing government initiatives and regulations that relate to economic reconciliation:

• Expand initiatives and programs beyond pilot projects and into long-term solutions.
• Improve efforts to assess ongoing initiatives in order to identify which are working well and which aren't.
• Monetize federal funding through long-term agreements.
• Re-think Ministerial consent under the Indian Act and how more control can be put into the hands of Indigenous people.

Procurement

Participants highlighted considerations, including ongoing barriers, related to procurement. These include:

• Procurement timelines: participants noted that timelines and conditions placed on Requests for Proposals were unreasonable and needlessly excluded the participation of Indigenous businesses.
• 5% Procurement target: participants asked how federal efforts to meet a 5% procurement target can be achieved while being inclusive to Indigenous suppliers of all locations across Canada.
  • Specifically, how will the government ensure that remote communities will not be disadvantaged?