January 6, 2010
By The Canadian Press
WINNIPEG - An aboriginal-owned lending organization wants a judicial review into what it claims is the federal government's refusal to include the bank in a program that encourages loans on reserves.
Tribal Wi-Chi-Way-Win Capital Corp. plans to file court documents Thursday claiming the government's loan loss reserve initiative excludes aboriginal banks that do most of the lending in native communities.
Alan Park, head of the bank that is owned by five Manitoba tribal councils, says that puts it and other aboriginal banks at a disadvantage because they can't use the money to guarantee lower interest rates.
"They're taking aboriginal-designated dollars, they're giving it to a non-aboriginal bank to give back to aboriginal people," he said.
The government had a closed-bid process in which it selected certain financial institutions to bid for the $15 million in the program, he said.
Aboriginal financial institutions, which were created specifically to provide the type of high-risk, on-reserve loans targeted by the program, were not consulted or given the opportunity to apply, he said.
"Why they would exclude us defies any logic whatsoever."
The federal government says the loan program is intended as collateral for financial institutions giving loans to medium and large First Nation businesses.
It's meant to "encourage commercial financial institutions to provide debt financing to First Nation businesses whose assets are on a reserve," according to government documents.
Margot Geduld, spokeswoman for Indian and Northern Affairs Canada, said Wednesday that she can't comment on legal documents the government has not yet received.
But she said that aboriginal financial institutions such as Wi-Chi-Way-Win Capital Corp. and the loan loss program "are complementary."
"The aboriginal financial institutions support aboriginal businesses with loans to a maximum of $250,000 and loan loss reserve program can only support First Nation businesses with loans from $250,000 and over."
Park said that's not true. While banks such as his generally only provide loans up to $250,000, they can and regularly do get exceptions to provide loans of up to $600,000, he said.
"At the end of the day, you can't and you shouldn't (give) a subsidy to Cadillac dealers and not the Volkswagen dealers," he said.
"We're both doing loans, in this case size doesn't matter."
Grant Stefanson, Park's lawyer, said the legal filing argues the government had a duty to consult with the aboriginal banks and that Indian Affairs may not have complied with their own policies requiring due diligence.
He said the lending group tried repeatedly to work things out with the federal government before choosing this route.
"No question there have been attempts made to deal directly with INAC in order to achieve a resolution."
Park said he also plans to file complaints Thursday with Canada's auditor general and the federal Treasury Board.
Clint Davis, president of the Canadian Council for Aboriginal Business, said excluding lending groups such as Tribal Wi-Chi-Way-Win Capital Corp. from the loan program might not result in a huge disadvantage.
While there may be a bit of overlap, most loans given out by such lenders are fairly small, he said. Many are also given out off-reserve.
"I'm not sure to what extent this program will have a significant impact on cannibalizing their ability to achieve their revenue targets," he said.
The government should instead look at supporting these groups with their own separate collateral program for the smaller loans they generally give out, he said.
"They should be funded, they should receive increased funding and they're vital to small business," he said.
"Because right now, I think, aboriginal small business is having a heck of a time trying to get any financial support from mainstream lending associations."