Risks and Opportunities for Aboriginal Financial Services Organizations
Capital, and access to it, is a key ingredient in economic activity. As First Nations groups look to future economic development, it imperative that they have ownership and control over such an essential lever of the economy. Alternatively, a nation which does not control the essential levers of its economy will always be subject to the influence of the external forces which do control these levers. The financial services industry which provides capital to First Nations communities is an essential element for future growth and development. The purpose of this paper is to review the risks and opportunities for First Nations initiated and controlled financial services organizations. Data for this review is taken from a comprehensive 2007 Market Demand Study (MDS) on Aboriginal financial services commissioned by the Atlantic Canadian First Nations. This study provides an excellent case for an assessment of the need – and ensuring opportunities and risks - for Aboriginal controlled financial services organizations. The MDS addressed the development of unregulated and regulated financial institution options in response to identified and anticipated demand. It was generally acknowledged that mainstream financial institutions providing the bulk of the First Nation debt financing fell within the risk tolerance of federally regulated financial institutions. Each community knew their respective borrowing levels and which institutions held that debt but the information had never been compiled or analyzed on a collective basis. Ulnooweg’s Board of Directors – comprised of Atlantic Chiefs – tasked Ulnooweg Development Group with the responsibility of undertaking a study to document, analyze and quantify this demand and make recommendations on an Aboriginally owned and controlled financial institution(s) to meet that demand. The MDS study provides a rich data set to analyze the issues facing Aboriginal Financial Institutions. Financial institutions that are Aboriginally owned and controlled create a number of opportunities and threats. Using the results of the study and taxonomies developed in the risk management literature, the paper will outline specific areas that the First Nations communities will need to address in order to ensure a better understanding and use of financial capital.
01 Jan 2008
Financial Services Industry
Strategic Research Theme
Governance and Public Policy