Download Financing for CED

ECON 369
Laura Lamb
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Kahnawá:ke Caisse Populaire: a community
based solution to lending
Early 1980s: The Economic Development
Department of the Mohawk Council of
Kahnawá:ke agreed that a local financial
institution was needed to service the
community….to improve access to capital.
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Choose credit union because
◦ Credit unions are owned by account holders, every
account holder has at least one share
◦ The democratic approach is a better fit with
Mohawk culture
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1986: arrangement between Mohawk Council
of Kahnawá:ke and Federation Desjardins
establish a Caisse Populaire branch in
Federation Desjardins
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Special mortgage arrangements
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Certificate of Possession is documentary
evidence of a First Nation member's lawful
possession of Reserve lands pursuant to the
Indian Act. This is similar to buying a share
in a company, but in this case the stock
equals use of land.
The Government of Canada retains legal title
to the land.
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Today the Kahnawá:ke Caisse Populaire is one
of the largest in Quebec with over $100
million in deposits.
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Based on research by Seth Asimakos,
Executive Director of the Canadian
Community Investment Network Cooperative.
Data up to 2008
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financing and technical assistance that
targets the underserved to develop
opportunities for income generation,
housing, community renewal, and
environmental sustainability.
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Those whose financial needs are not being
fully met by the mainstream financial sector
◦
individuals
 communities
 social enterprises
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Limited collateral or equity to offer against a
loan
Bad or limited credit history
Financial institution’s lack of understanding
of the type of enterprise i.e. social enterprise
Profit margins are too low to consider serving
the potential client/community
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What type of capital?
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Total value of community investment deals in
Canada in 2008 was >$1.4 billion
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 A steady increase in investment from 2002 to 2008.
 Some of the growth is real, some is due to counting
issues.
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Community Futures Organizations
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Credit Unions
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Aboriginal Finance Institutions
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Community Economic Development
Investment Funds
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Formed in 1980s by federal government to
support community-based initiatives in lowincome rural regions across Canada
267 organizations
Each receives operating revenue
Operate at arm’s length with volunteer
boards
Provide financing up to $150,000 for the
start-up, expansion, or stabilization of local
business.
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Organized locally, cooperative models
First community investment organizations in
Canada
Earmark a portion of assets for investment in
the underserved.
Large credit unions direct the largest amount
of money into community investment
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Formed by federal government and Aboriginal
leaders in the 1980s and 1990s
Purpose is to reduce barriers to the entry of
Aboriginal small businesses into the Canadian
economy
Currently, 59 independently-owned and –
controlled AFIs
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Variety of structures
Some are a blind pool, any entrepreneur can
apply
Some are industry specific
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The conservation economy
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Affordable Housing
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Transition to Work
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Fair Trade
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Social enterprise
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This material is based on “Equity Capital for
CED” by Stewart E. Perry in Making Waves,
vol.20 (1).
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Cash starved
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Low income
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High unemployment
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Welfare dependency
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Tax incentive
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Corporate donors
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CED projects
◦ Provides capital, capacity & competence
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What type of capital?
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Competence in what?
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Expand capacity to develop
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Launched in 1991
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Who is eligible to participate?
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Who are the eligible recipients?
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What is the tax benefit?
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Who are the major contributors?
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US$30 million in donations in the first few
years.
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Is such a program applicable to Canada?
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