Barriers To Accessing Capital

One of the critical components for indigenous initiatives to prosper is immediate access to capital and solid financial tools. Without these, it will be difficult for proponents of these projects to finish what they have started. However, there are barriers and debilitating circumstances deterring communities from moving forward such as obsolete legislation. With hands tied, strategies to increase revenue through private investment and borrowing remain a vision. The quest to make Indigenous investments affordable becomes elusive because of these barriers:

Socio-economic Barriers

In Canada's intricate economic landscape, paved roads, healthcare facilities and fire services are the fundamentals of large business operations. Without these basic public services, it will not be easy to consider potential investments. The fact that these fundamentals are lacking can also worsen socio-economic disparities. A report by Aboriginal Affairs and Northern Development Canada in 2011-2012 outlines the pressing issues on the need to address essential infrastructure on reserve to generate projects. To move forward with these projects, vital services like sewage systems and industrial-scale water must be present. 

It is imperative to adopt a culturally appropriate approach to overcome these challenges and develop sustainable progress. For this approach to come to fruition, collective efforts to resolve underlying socio-economic issues that negatively impact community well-being and prosperity should be considered a top priority. While such investments may entail significant government expenditure, studies suggest that the long-term benefits far outweigh the short-term costs.

?Akisq’nuk First Nation's Water Systems
Source: https://www.sac-isc.gc.ca/eng/1628172767569/1628172789746

Governance Barriers

Institutional Barriers

There are many hurdles associated with investing in Indigenous communities and most of these are due to administrative and legal obstacles, preventing communities from utilising their resources and territories effectively. The Indian Act, for instance, is a longstanding legislation focusing on governing economic activity on First Nation lands that poses challenges as it restricts property seizure, making it hard for Indigenous communities to secure commercial loans because of limited collaterals. These barriers have been gradually addressed by financial institutions such as POINTRADE by providing alternative forms of funding or collateral. Pushing for the modernisation of the Indian Act is in the works and if granted, communities will have greater control over their resources and lands. 

Closing Finance Gaps

Modernisation of Federal-First Nation Fiscal Relationship

There are inevitable challenges that Indigenous communities face because of specific provisions of the Indian Act. Since it prevents communities from investing due to restrictions on property, communities urge the federal government and First Nation authorities to take proactive steps. The first step towards modernisation is to review the Indian Act, focusing on provisions that limit Indigenous peoples from using their property as collateral. Loan guarantee programmes must also be examined to facilitate investment.

Re-Evaluate Governance Processes and Capabilities

Having a dedicated finance specialist is necessary for overseeing government finances. However, the lack of funds to train professionals to do this job causes Indigenous communities to face another hurdle. Aside from the scarcity of funds, outdated regulations create constraints on their ability to generate revenue through taxation. While taxation exists in some cases, it does not apply to all residents within the jurisdiction.  

Developing culturally appropriate strategies will help tackle underlying socio-economic issues and provide the necessary training and resources to enhance financial management. When there is long-term funding support from the government to cover operational costs, problems with tax-sharing and budget will be properly addressed. It is easy for Indigenous communities to fund initiatives when they have access to necessary financial resources when required. 

Invest in education and training programmes

For continuous growth and development, education should be considered a priority because it is vital for helping adults gain essential skills and knowledge as well as providing opportunities for peer-to-peer learning. When there are adequate education facilities and opportunities for young people, the education gap between Indigenous communities and the rest of Canada will be narrowed down.  
 
Collaboration among federal, provincial, and Indigenous communities is essential to address this barrier. Action items include identifying successful programmes, scaling them up across communities, and providing additional funding to improve classroom conditions and teaching resources.

First Nations University of Canada
Source: https://www.thecanadianencyclopedia.ca/en/article/aboriginal-people-education

Promote Regional Cooperation

While fiscal reform is a resolution that promises positive results, it is not enough to solve the challenges Indigenous communities face. It is important to attract outside investment, but high costs, lengthy wait times, and rigid times must be properly addressed first. Without resolving these issues, there will be limits to the flow of capital not only into Indigenous communities but also into businesses. Economic development, infrastructure, and multi-stakeholder strategies are important to advance on these issues.  

One thing that needs to be addressed is to reduce red tape as it delays grants and loans. Without delays, it is easy to establish regional resource centres to help communities understand resource development projects while promoting successful on-reserve investments to improve investor confidence.  

Empower Aboriginal Financial Institutions

Recognising the valuable potential of Aboriginal Financial Institutions (AFIs) in advancing financial access for Indigenous communities, recent insights shed light on critical areas needing improvement. A 2007 report by Aboriginal Business Canada emphasised the imperative for substantial enhancements in the operational capacities of AFIs, including loan management, financial sustainability, and fostering effective collaboration among them. 

Strengthening AFIs holds promise for not only broadening the scope of services they offer but also exploring avenues such as mortgage financing. Furthermore, closer alignment between AFIs and mainstream financial entities could yield benefits such as reduced borrowing costs, streamlined credit assessments, enhanced risk management, and expanded funding avenues for AFIs. 

Strengthen Financial Literacy and Education Opportunities:

The prosperity of Indigenous governments and entrepreneurs depends on having a solid grasp of financial tools and services. However, explaining complicated financial ideas in a way that is easy to understand and fits with the culture is crucial. Since each Indigenous community is different, using the same approach everywhere might not work well. It is important for governments, businesses, and non-profits working in reserves to better connect with Indigenous peoples to help them learn more about finances.

For the federal government, making financial literacy a requirement for getting government grants and working with these communities, provincial, and territorial governments to create financial education tools that fit each community's culture are important steps. Also, creating more flexible funding agreements that manage their money well can make it easier for them to get money. 

The Canadian Indigenous Investment Summit

The Canadian Indigenous Investment Summit serves as a crucial platform where investors, visionary leaders, and Indigenous communities can share a common business goal. The focus is not only on gathering for one event, but on building a fruitful partnership and creating a movement that unites all investment sectors to promote sustainable economic growth.  

The summit offers valuable resources and insights through our team of subject matter experts across various sectors, facilitating access to meaningful Indigenous investment opportunities throughout Canada. Whether you're an investor or eager to deepen your understanding of Indigenous investment, we provide a platform for impactful discussions and the exchange of valuable insights. With a diverse array of investments converging, we ensure that attendees of the summit will benefit from a seamless and efficient business environment.  Register your interest and save a spot at the summit. 

Make sure to subscribe to Drumbeats. We explore the latest news in Indigenous investment. We also offer detailed analyses and interviews with leaders in the field.