From Barriers to Bridges: Navigating the Unique Landscape of Indigenous Enterprise Financing

Written By Dom Sorbara, David Bursey and Fatima Kawar

In recent years, growing attention and effort has been placed on studying Indigenous economies in Canada with the aim of closing gaps in business, project, community and housing financing, ultimately closing the infrastructure gap.¹ This article examines some of the challenges and opportunities associated with closing those gaps.

The lack of access to good financing options and ongoing operating and maintenance capital on reserve is one of the leading reasons for the persistence of the infrastructure gap. However, this issue is drawing serious attention with the growth of Indigenous community involvement in economic enterprise ventures, social and civil infrastructure development, and resource projects. Morningstar DBRS has reported that Indigenous-related organizations in Canada are increasingly accessing capital markets and there is "considerable potential" for more activity.²

We can expect further developments in this space as the federal government works to implement commitments made under the United Declaration on the Rights of Indigenous Peoples Act.³ This Act requires the Government of Canada to "take all measures necessary" to ensure that the laws of Canada are consistent with the United Nations Declaration on the Rights of Indigenous Peoples.⁴ Economic reconciliation is a foundation for these policy efforts, and recognized as a priority at the federal and provincial levels. 

Article 39 of the Declaration states that "Indigenous peoples have the right to have access to financial and technical assistance from States and through international cooperation, for the enjoyment of the rights contained in this Declaration".⁵ This objective involves strong policy initiatives at all levels of government to change the historical legacy, but there are some early-stage efforts at the federal and provincial governments. 

On December 16, 2024, the federal government launched an Indigenous Loan Guarantee program to further its commitments to economic reconciliation.⁶ Indigenous communities and entities can apply for support if they plan to invest in eligible natural resource or energy projects in Canada. Lenders interested in facilitating Indigenous projects should be aware of the differences between the financial landscape on- and off-reserve.

Challenges in Indigenous Community Lending

Lending to Indigenous communities has unique and complex elements. One of the most significant obstacles is the Indian Act, specifically Section 89 which prohibits property situated on reserve from being seized.⁷ This prohibition prevents real or personal property on reserve from being used as collateral, which limits access to capital for Indigenous borrowers. Options to work around this constraint include conditional sale agreements, structuring loans through corporations, or securing assets off-reserve.⁸

Lending to Indigenous communities and entities also involves navigating multiple layers of government and law. The First Nations Fiscal Management Act (FNFMA) gives First Nation governments greater authority over financial management, including revenue generation and infrastructure financing.⁹ This legislation allows security interests to be created over specified "other-source revenues", such as tax revenues or interest on investments. However, financing using these sources can only be used for purposes that support economic or social development, with an emphasis on infrastructure projects.

Indigenous-Led Organizations Bridging the Gap

Several Indigenous-led organizations are helping to bridge the gap between lenders and communities, providing solutions to access capital that overcome the complexities of lending within the regulatory regime that governs loans to Indigenous communities. These organizations are empowering Indigenous communities to become lenders in their own right, offering a pathway to self-sufficiency and economic independence.

1. First Nations Finance Authority (FNFA): The FNFA is a non-profit organization without share capital, created by the FNFMA.¹⁰ The FNFA offers Indigenous governments investment options, capital planning advice, and access to long-term loans with preferable interest rates. The FNFA is governed only by its First Nations members, who choose to join voluntarily.  It is not a Crown agency. The FNFA receives funding requests from borrowing members and fulfils these requests using a credit facility supported through a syndicate of banks. Then, with advice from the banking syndicate, debentures are issued for sale to capital market investors. S&P Global Ratings has recently upgraded the FNFA's long-term issuer credit and issue-level ratings to AA-.
2. First Nations Infrastructure Institute (FNII): The FNII is also created through the FNFMA.¹¹ Entering into a partnership with the FNII signals that a project is "shovel-ready", has reasonable cost estimates and comes with additional support from industry professionals. The FNII's involvement can reduce the perceived risk of lending to Indigenous infrastructure projects, making them more attractive to potential investors.
3. National Aboriginal Capital Corporations Association (NACCA): NACCA supports over 50 Indigenous Financial Institutions (IFIs) and works to improve access to capital for Indigenous businesses.¹² IFIs are community-based financial organizations that provide developmental loans, business financing, and support to Indigenous businesses across Canada. IFIs offer loans to borrowers who may not qualify for conventional financing due to a lack of credit history or non-traditional risk profiles. They offer loans that are not based on credit history, but on personal characteristics. These types of loans can help recipients establish a credit history. In 2022, NACCA created the Indigenous Growth Fund with contributions from the Business Development Bank of Canada.¹³ NACCA currently manages the fund. The fund is intended to improve access to capital for IFIs and Indigenous small- and medium-sized enterprises and accepts investments from accredited investors.
4. First Nations Bank of Canada (FNBC): FNBC is Canada's first Indigenous-controlled chartered bank and offers direct investing opportunities.¹⁴ One of the services it offers is direct investing. As a federally regulated bank, FNBC operates under the same regulations as other banks, providing a secure and well-regulated environment for investors.
5. Private Indigenous Investment Funds: In 2017, Ki'mola Indigenous Capital was Canada's only First Nation owned private firm.¹⁵ In recent years, several other Indigenous owned and led private investment companies, such as Raven Indigenous Capital Partners¹⁶ and the Longhouse Capital Partners have emerged.¹⁷ Each private firm will have its own unique investment strategies. Lenders with large capital pools may consider partnering with or investing in these private firms since the number of such firms is likely to grow in response to increasing efforts toward economic reconciliation.
6. Assembly of First Nations (AFN): The Assembly of First Nations, a national organization representing First Nations across Canada, plays a crucial role in advocating for Indigenous economic development and advancing the interests of First Nations communities.  AFN works closely with federal and provincial governments, Indigenous organizations, and businesses to advocate for policies and initiatives that support economic growth, including improved access to financing. By partnering with organizations such as the AFN, lenders can stay informed about emerging opportunities, policies, and regulations that impact Indigenous communities and businesses. AFN is a key ally in ensuring that economic reconciliation is not only about access to capital but also about creating a sustainable, self-determined economic future for Indigenous peoples.

As the federal and provincial governments continue to focus on economic reconciliation with Indigenous communities, private lenders have a growing opportunity to invest in Indigenous-led projects and businesses. By working with organizations like the FNFA, IFIs, and private Indigenous-led investment firms, lenders can help close the financing gap while contributing to long-term economic growth in Indigenous communities.

Nonetheless, lenders must understand and work within the unique regulatory regime and challenges in the Indigenous lending landscape. With the right guidance and strategic partnerships, private capital can play a vital role in advancing Indigenous economic development and reconciliation.

To discuss these issues further, please contact Dom Sorbara.

The authors are grateful for the assistance of Lukas VanDusen, articling student, in connection with the preparation of this article.

¹ Calista Cheung, James Fudurich, Janki Shah and Farrukh Suvankulov, 'Survey of Indigenous Firms: A snapshot of Wages, Prices and Financing in the Indigenous Business Sector in Canada' (Bank of Canada, 2024) https://www.bankofcanada.ca/wp-content/uploads/2024/05/sdp2024-4.pdf; First Nations Financial Management Board, 'Unlocking First Nations Economies' (FNFMB, 2022) https://fnfmb.com/sites/default/files/2022-11/2022-11-09_roadmap_chapter_4_unlocking_first_nations_economies.pdf;

² Morningstar DBRS, 'Access to Capital Plays a Critical Role in Supporting Economic Reconciliation with Indigenous Peoples in Canada' (2024) https://dbrs.morningstar.com/research/440237

³ United Nations Declaration on the Rights of Indigenous Peoples Act, SC 2021, c 14, https://canlii.ca/t/554bd

⁴ Ibid, s. 5

⁵ United Nations Declaration on the Rights of Indigenous Peoples, https://www.un.org/development/desa/indigenouspeoples/wp-content/uploads/sites/19/2018/11/UNDRIP_E_web.pdf

⁶ Department of Finance Canada, 'Canada Indigenous Loan Guarantee Corporation’, https://www.canada.ca/en/department-finance/news/2024/12/canada-indigenous-loan-guarantee-corporation.html

⁷ Indian Act, RSC 1985, c I-5, s 89 https://canlii.ca/t/5439p

⁸ Alain Bartleman and James C. Hopkins 'Opinion: Section 89 and the challenges of on-reserve business financing' (Anishinabek News, 2020) https://anishinabeknews.ca/2020/11/20/opinion-section-89-and-the-challenges-of-on-reserve-business-financing/

⁹ First Nations Fiscal Management Act, SC 2005, c 9, https://canlii.ca/t/56dkm

¹⁰ First Nations Finance Authority, https://fnfmb.com/en/faq/first-nations-finance-authority-fnfa

¹¹ First Nations Infrastructure Institute, https://fnii.ca/about-us/

¹² National Aboriginal Capital Corporations Association, https://nacca.ca/about/

¹³ Indigenous Growth Fund, https://nacca.ca/igf/

¹⁴ First Nations Bank of Canada, https://www.fnbc.ca/AboutUs/

¹⁵ Ki'mola Indigenous Capital, http://visionsfinancial.ca/kimola-indigenous-capital/

¹⁶ Raven Indigenous Capital Partners, https://ravencapitalpartners.com/

¹⁷ Longhouse Capital Partners, https://lcp-inc.com/

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