Loan guarantee pledge brings welcomed 'flexibility'
A $5-billion commitment for the long-awaited National Indigenous Loan Guarantee Program was announced in the proposed federal budget by the Liberal government last week, making an Indigenous loan company happy. The program aims to help foster economic empowerment and reconciliation by providing Indigenous communities with access to capital for ownership in resource projects in mining, energy, forestry and other infrastructure projects. "One of the welcomed elements is the project flexibility within the loan guarantee program," said Jason Rasevych, president of the Anishnawbe Business Professionals Association. "This flexibility allows Indigenous communities to tailor projects to meet their unique needs and aspirations, driving sustainable development across various sectors." He added that the Indigenous Guarantee Loan Program creates a positive impact with its role in advancing economic reconciliation by providing Indigenous communities with the necessary resources. Rasevych called the initiative a "positive commitment" that protects lenders from potential defaults while de-risking the cost of capital. "A loan guarantee provides protection to lenders," he said. "If a borrower defaults, a third party (in this case, the federal government) commits to paying the outstanding amount. This mechanism encourages lenders to provide capital to Indigenous communities, knowing that the government will step in if necessary. "Since these projects will have Indigenous owners and partners, the First Nations involved would benefit from decision-making and making sure the Nation provides the social licence. This creates a lower risk profile for the project (derisking) from infringement of Indigenous rights." Rasevych says Canada needs to work with Indigenous leaders on an independent decision-making framework for considering which projects are approved for loan guarantees and in which jurisdiction. "This will require a balanced approach to ensuring that industries across Canada have a fair and equal opportunity to participate in this program and that the government does not make partisan decisions based on political agendas," he said. Rasevych added that there could also be a multiplier effect for working with Indigenous financial institutions, investment banks and funds, private equity funds and other financing models and mechanisms.
Sandi Krasowski, Local Journalism Initiative Reporter, The Chronicle-Journal
