Bill Curry
Ottawa — From Thursday's Globe and Mail Published on Thursday, Jan. 07, 2010 12:00AM EST Last updated on Thursday, Jan. 07, 2010 7:56AM EST
Indian Affairs is facing a Federal Court challenge and a complaint to the Auditor-General alleging the government is trying to run native banks out of business.
The native financial company behind the court action says Canada's 57 Aboriginal Financial Institutions - known as AFIs - were secretly and unfairly shut out of a new program to spur economic growth on reserves.
Instead, the government awarded the program to a group of five much larger banks that includes the Desjardins Group, the Assiniboine Credit Union and the First Nations Bank of Canada, which is affiliated with TD Bank.
The program gives these institutions a pool of federal tax dollars worth at least $13.5-million to tap into in case they lose money lending to on-reserve businesses.
The company behind the complaint - Tribal Wi-Chi-Way-Win Capital - claims Indian Affairs Minister Chuck Strahl is helping these big hitters move in on their small markets. The company claims the smaller native banks will not be able to compete when it comes to interest charges because of their size and the new federal backing of their competitors.
"It's a risk-free golden brick road into a market that we've been beating our brains out in for 20 years," said Al Park, the CEO of the company, which is one of 57 AFIs across Canada. The Federal Court will be asked to force Ottawa into letting Mr. Park's company participate in the new program. The company is also filing complaints with the Auditor-General and the federal Treasury Board.
The two other chosen companies to run the new program are the Affinity Credit Union and the Business Development Bank of Canada. The government has so far announced that the five institutions - none of which are fully owned and operated by aboriginals - will receive a combined "loan loss reserve fund" of $13.5-million.
Mr. Park said the new program contradicts the minister's past praise of these smaller Aboriginal Financial Intuitions as a key part of the government's federal plans.
In a 2008 speech to Toronto's Empire Club, Mr. Strahl boasted that these federally created, native-run institutions have managed to grow an original $200-million investment made two decades ago into $1.2-billion worth of loans.
"Aboriginal Financial Institutions are a prime way we as a government are using partnerships to help aboriginal entrepreneurs generate tangible economic results," Mr. Strahl told the business audience at the time.
Praising successful native businesses and encouraging further growth has been a central pillar of the Conservative government's native policy. Mr. Strahl has said he wants federal policies reshaped so that they reward native businesses that can put forward strong proposals.
Mr. Strahl's office issued a statement yesterday suggesting the new program was needed to address hurdles created by the Indian Act. The government has said the Indian Act makes it difficult for businesses to put up on-reserve capital - such as homes and buildings - as assets to secure a loan. Spokeswoman Nina Chiarelli said the new program should complement the existing work of AFIs because it will target larger loans.
"The loan loss reserve program was designed to encourage loans where the business proposal is strong, but securing financing could be difficult or limited because of the Indian Act," she said.
The umbrella organization representing AFIs - the National Aboriginal Capital Corporations Association - is not party to the legal action. An official with the association said its members had not had a chance to review the case.
Randa Stewart, an Assiniboine Credit Union vice-president, declined comment but said her company has a strong reputation among aboriginals.