Financing for CED

1
Financing for CED

• ECON 369
• Laura Lamb

2
1. Kahnawáke First Nation

• Kahnawáke Caisse Populaire a community based
  solution to lending
• Early 1980s The Economic Development Department
  of the Mohawk Council of Kahnawáke agreed that a
  local financial institution was needed to service
  the community.to improve access to capital.

3
Credit union versus a bank?

• 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

4

• 1986 arrangement between Mohawk Council of
  Kahnawáke and Federation Desjardins establish a
  Caisse Populaire branch in Federation Desjardins

5
 Special products designed for First Nation
financial circumstances

• Special mortgage arrangements

6
Certificate of possession

• 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. 

7

• Today the Kahnawáke Caisse Populaire is one of
  the largest in Quebec with over 100 million in
  deposits.

8
2. Community Investment

• Based on research by Seth Asimakos, Executive
  Director of the Canadian Community Investment
  Network Cooperative.
• Data up to 2008

9
What is community investment?

• financing and technical assistance that targets
  the underserved to develop opportunities for
  income generation, housing, community renewal,
  and environmental sustainability.

10
Who is the underserved?

• Those whose financial needs are not being fully
  met by the mainstream financial sector
• individuals
• communities
• social enterprises

11
Why are they underserved?

• Limited collateral or equity to offer against a
  loan
• Bad or limited credit history
• Financial institutions lack of understanding of
  the type of enterprise i.e. social enterprise
• Profit margins are too low to consider serving
  the potential client/community

12
3. Sources of capital for Community Investment
Funds

• What type of capital?

13
Who supplies it how much capital?

• Total value of community investment deals in
  Canada in 2008 was gt1.4 billion

14
4. Community Investment is a growth sector

• A steady increase in investment from 2002 to
  2008.
• Some of the growth is real, some is due to
  counting issues.

15
How is this capital allocated?
16
The major players

• Community Futures Organizations
• Credit Unions
• Aboriginal Finance Institutions
• Community Economic Development Investment Funds

17
Community Futures Organizations

• Formed in 1980s by federal government to support
  community-based initiatives in low-income rural
  regions across Canada
• 267 organizations
• Each receives operating revenue
• Operate at arms length with volunteer boards
• Provide financing up to 150,000 for the
  start-up, expansion, or stabilization of local
  business.

18
Credit Unions

• 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

19
Aboriginal Finance Institutions

• 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

20
Community Economic Development Investment Funds

• Variety of structures
• Some are a blind pool, any entrepreneur can apply
• Some are industry specific

21
5. What type of projects are investment funds
used for?

• The conservation economy
• Affordable Housing
• Transition to Work
• Fair Trade
• Social enterprise

22
 5. New Hampshires Community Development
Finance Authority

• This material is based on Equity Capital for
  CED by Stewart E. Perry in Making Waves, vol.20
  (1).

23
New Hampshire background

• Cash starved
• Low income
• High unemployment
• Welfare dependency

24
The Financial authority

• Tax incentive
• Corporate donors
• CED projects
• Provides capital, capacity competence

25
Capital

• What type of capital?

26
Competence

• Competence in what?

27
Capacity

• Expand capacity to develop

28
The tax credit program

• Launched in 1991
• Who is eligible to participate?
• Who are the eligible recipients?
• What is the tax benefit?

29

• Who are the major contributors?

30
Success of the program

• US30 million in donations in the first few
  years.

31
What projects are being capitalized?
32
Evidence of competence capacity building
33
Economic Impact of CDFA
34

• Is such a program applicable to Canada?