Banking On Brighter Futures
April 05th, 2016
Research by Dr. Cooper, as well as Prof. Pauline Downer and recently retired Dr. Alex Faseruk, indicates financial institutions may need to adapt their approach in working with Aboriginal entrepreneurs and band-owned enterprises.
Dr. Cooper, who has studied Aboriginal businesses since 2007, says the credit profiles of Aboriginal business people may be very different than those of their non-Aboriginal counterparts. He notes that people living in an Aboriginal community don’t own their homes—rather, the band retains ownership. Therefore, that rules out a common financing avenue of mortgaging a home to start or expand a business.
Aboriginal business owners also face two complex taxation regimes—they’re not taxed when they sell goods and services on First Nations land, but they are taxed once they sell products or work outside their communities.
These challenges can make working for a band-owned enterprise more appealing for a young Aboriginal entrepreneur than starting a small business.
Band-owned enterprises also face their own challenges. While they’re more likely to be trusted in their communities than non-Aboriginal businesses, this trust demands that the Aboriginal business align its interests with the culture and expectations of the community, or risk failure.
“If you look at the demographics the only growing populations of young people, especially in rural Canada, are predominantly Aboriginal … they’re looking to better their community and better themselves.” — Dr. Tom Cooper
They may also face changes in business leadership following band council elections that are held every two years. In an earlier study of Aboriginal-owned fishing enterprises in Atlantic Canada, Dr. Cooper found this had a direct effect on the bottom line.
As it turns out, this Memorial-led research is increasingly important as more Aboriginal communities and entrepreneurs try to start more businesses with help from land-claim settlement dollars, through joint ventures or financing from mainstream banking institutions.
Dr. Cooper says a better understanding of Aboriginal entrepreneurs and the challenges they face can lead to better policy decisions—and it can’t come soon enough as growing Aboriginal populations in rural parts of Canada seek better economic opportunities for themselves and their communities.