Opinion: Is it time to build a strong Canadian Aboriginal focused banking system?

Updated: May 15

“A focus has been placed on self-governance but progress can only be made if we don't develop strong aboriginal-focused banks to help build a self-sufficient and strong economy for aboriginals in Canada. "

By: Allan R Kirby

The importance of an Aboriginal banking system

There is no denying the importance of a sound banking system within a sovereign country.  Banks are the economic drivers to capital expansion and help with the creation of wealth. This is because banks take funds in the form of deposits, then lend that money out and make

investments, with the idea of generating returns that exceed their costs. This allows them to repay depositors when required with interest.  Additionally, when making loans and investments, banks try to ensure they limit the use of their funds in investments that are

deemed too risky or unprofitable.  Besides being risk-averse, banks also act as advisors for businesses and industries; as well as helping sovereign nations develop trade within borders and externally as well.

"Download Opinion: Is it time to build a strong Canadian Aboriginal focused banking system?

The question becomes; should we take a more serious look at the development of an aboriginal banking system such as the enhancement of current native-focused banks or creating newer banks to the scale required to meet the capital needs of aboriginal communities? To begin with; focusing on a stronger banking system would allow

aboriginals to reduce their reliance on non-aboriginal banks that;

1. May not share the same economic vision.

2. May hinder the ability of aboriginals to self-govern.

3. Will not build a true economic force within the aboriginal community

Armina Ligaya, Canadian Press writer, reported “The total amount of personal and business income within Canadian indigenous communities totaled about $33 billion in 2016, nearly triple the $12 billion in 2001, according to  Brent Mainprize, a professor at the University of

Victoria’s Gustavson School of Business who teaches entrepreneurship and Aboriginal economic development."

Canada's larger banks are getting involved with longer-term large aboriginal capital projects which comes as no surprise given their size and scale. They can easily meet the funding needs for major capital projects.  Where I have concern is their willingness to work


1. Smaller community projects and local businesses.

2. Entrepreneurs looking for seed money to help fund their businesses.

3. Families as well as individuals.

The major banks will do what is in the best interest for them and their shareholders. This does not necessarily mean they will always have the best interests in the communities they serve. I am not arguing that major banks are bad financial institutions, I am just highlighting the fact that they have their own interests to follow, which may run differently to the interests of aboriginal communities.

Barriers Do Exist:

Unfortunately, it is necessary to highlight a few barriers that create issues with regard to aboriginal communities developing their own banking system that could flourish. However, it needs to be clearly understood that these are highly complex problems related to Self Governance, Property Rights, and Development Challenges that could take decades to resolve.

Self Government Issues:

Many Aboriginal people see self-government as a way to preserve their culture and attain greater control over their land, resources, and administration of laws and practices that affect their lives. Aboriginal groups have argued they have an inherent right to self-government and the right of self-government is recognized in Section 35 of the Constitution Act, 1982. However, the major issue with the amendment is that although aboriginal rights are recognized, the act does not define what those rights are.

As a result, the government, courts, and aboriginal groups have to rely on the Indian Act to help make decisions.  But let's be clear this is legislation that was passed in 1876 and really is not applicable to today's modern-day challenges.  Therefore, even though self-government

is recognized, it becomes a very complicated process for aboriginal groups to negotiate for complete jurisdiction. More often than not, Aboriginals get complete jurisdiction in some areas, but limited powers in others, which often can be unclear.

A second issue with self-government is that aboriginals believe they were the first people to govern Canada and never willingly surrendered their autonomy.  As a result, some leaders in the aboriginal community such as Stó:lo author Lee Maracle consider that Section 35 reinforces colonialism by recognizing Canadian law as supreme[2]. They believe that it is better instead to deal with the situations through diplomacy as would be expected under a true nation-to-nation relationship.

This is why a true aboriginal banking system is needed.  The ability to self govern while dependent on external banks hinders the aboriginal community’s ability to govern itself. If individuals, small businesses as well as local governments have difficulty getting access to capital through loans and investments, their ability to effectively govern will be affected.  Additionally, building a strong financial system within the aboriginal community would not only allow for less reliance on non-aboriginal banks but ensure profits are kept within

the aboriginal community, thus allowing for growth and economic expansion. There is no guarantee that non-aboriginal banks will reinvest profits derived from aboriginal activities back into the communities. As I explained before, self-government could be hindered

further if banks exit the aboriginal markets during downturns in the economy.

Aboriginal Property Rights:

One major issue that currently affects aboriginal banking is First Nations' century-long issue of individual land rights and its effects on aboriginal finances. Most Canadians are likely unaware that First Nation communities are subject to strict land ownership rules written

in the Indian Act.  Simply put, aboriginals do not own the land they live on. This is significant because if aboriginals can’t own land, they have no assets with which to use in order to secure mortgages or get loans to start a business.  Additionally, no hard assets can also

mean aboriginals could end up with poor credit scores or no credit score at all. This exacerbates the challenges of accessing financing from financial institutions. Hernando de Soto’s book, "The Mystery of Capital" highlights the primary causes of poverty in the world is the lack of clear property rights. He notes that the world’s poor often have the use of property upon which they grow crops, build homes, and operate businesses. He also notes, however, that the poor generally lack clear title to the property they use, and are thus locked out of the formal, legal economy—and that is the root of their poverty.  This is why many aboriginals believe greater autonomy needs to start with individual land rights[1].

Simply recognizing property rights is only a first step. There is also the need for a financial intermediary such as a bank to be willing to convert those properties into loans to help with economic growth and investments. The issue is double-sided. Will aboriginals receive the

best terms or will non- aboriginal banks see aboriginals individuals, families, and small businesses a higher risk and provide terms more favorable to the banks?