THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Wednesday, April 15, 2026
The Standing Senate Committee on Banking, Commerce and the Economy met with videoconference this day at 4:20 p.m. [ET] to study and report on access to credit and capital markets for small- and medium-sized businesses as a foundation for growth and productivity improvement in the Canadian economy.
Senator Clément Gignac (Chair ) in the chair.
[Translation]
The Chair: Honourable senators, my name is Clément Gignac, senator from Quebec and chair of the Standing Senate Committee on Banking, Commerce and the Economy.
I wish to welcome those who are watching us today, as well as those watching us online at sencanada.ca.
Before we continue, I would ask my fellow committee members to introduce themselves.
[English]
Senator Varone: Toni Varone, Ontario.
Senator Pupatello: Sandra Pupatello, Ontario.
Senator Fridhandler: Daryl Fridhandler, Alberta.
[Translation]
Senator Loffreda: Good morning and welcome. Tony Loffreda from Quebec.
Senator Henkel: Good morning and welcome. Danièle Henkel, Alma, Quebec.
Senator Ringuette: Nice to see you again. Pierrette Ringuette from New Brunswick.
[English]
Senator Yussuff: Hassan Yussuff, Ontario.
Senator C. Deacon: Colin Deacon, Nova Scotia.
Senator Wallin: Pamela Wallin, Saskatchewan.
Senator Martin: Yonah Martin, British Columbia.
[Translation]
The Chair: This is our eighth meeting in our special study on access to credit and capital markets for small- and medium-sized businesses as a foundation for growth and productivity improvement in the Canadian economy.
I would like to welcome our first two witnesses today. They are from the Desjardins Group: Jean-Yves Bourgeois, Executive Vice-President, Business Services, and Bernard Brun, Vice-President, Government Relations.
Mr. Bourgeois, I invite you to give your opening remarks. After your remarks, I will invite my colleagues to ask you questions.
Jean-Yves Bourgeois, Executive Vice-President, Business Services, Desjardins Group: Thank you, Mr. Chair. I will let my colleague Mr. Brun begin.
Bernard Brun, Vice-President, Government Relations, Desjardins Group: Mr. Chair, members of the Standing Senate Committee on Banking, Commerce and the Economy, on behalf of the Desjardins Group and myself, thank you for the invitation. I am joined today by my colleague Jean-Yves Bourgeois, Executive Vice-President, Business Services at the Desjardins Group.
It is a privilege to contribute to your study on access to credit and capital markets for small- and medium-sized enterprises, a key lever not only for economic growth, but also for productivity, innovation and the sustainability of entrepreneurship in Canada.
In this regard, the Desjardins Group is both a major financial player and a local partner for SMEs in Quebec and across Canada.
First, I would like to provide some background on the Desjardins Group, and then my colleague will talk about our role with businesses and our contribution to current economic issues.
Desjardins currently has more than $510 billion in assets, more than 10 million members and clients, and supports more than 430,000 businesses, from small- and medium-sized businesses to large organizations, in all sectors of the Canadian economy.
With that, I’ll turn it over to my colleague.
Mr. Bourgeois: Good afternoon, senators.
For SMEs, this means gradual, structured and tailored access to different sources of financing in Canada, ranging from traditional bank lending to capital markets and investment capital, depending on their stage of development.
A typical SME is, of course, not funded from public markets. On the other hand, when an SME gets financing from a private investment fund or high-net-worth investors, it is also a real capital market transaction.
Unlike a purely credit-based transaction model, Desjardins’s approach relies on the integration of financial levers, including bank financing, investment capital and market access within a sustainable, multi-year relationship and within a company’s life cycle.
Desjardins is one of the few players that gives SMEs real, gradual access to capital markets and to the various sources they need to grow.
This approach positions Desjardins as a strategic business partner, much more than a lender, which is able to structure solutions that involve capital markets when needed.
Our business model is based on three essential foundations: proximity, regional anchoring and long-term vision.
Beyond access to credit, which is often the entry point, the key issue for many SMEs is structured and gradual access to capital markets. That is precisely how Desjardins’s approach differs.
Venture capital is not a peripheral product that we offer; it is a key lever that enables innovative and growing SMEs to achieve a critical mass and, ultimately, credible access to other sources of financing, including capital markets.
This approach also includes support for the entire life cycle of the business: from start-up to growth, from innovation to productivity improvement and, above all, from business succession to business transfer, a major structural issue for the Canadian economy right now.
In practical terms, this support relies on dedicated and specialized teams, which provide tailored financing solutions, strategic risk management support and financial structuring tailored to business situations, support for innovation, organizational and digital transformation and structured support for business recovery, transfer and succession.
Desjardins’s investment mandate is part and parcel of its cooperative mission. It seeks to grow collective savings while actively supporting productivity, innovation and sustainable economic development. This includes integrating venture capital and investment capital into our overall business package, enabling high-potential SMEs to access specialized funds, finance their innovation and growth projects and, where appropriate, prepare for a structured presence in capital markets.
Our complementary approach to traditional financing is particularly critical for businesses in the expansion, transformation or succession phase. Through this commitment, Desjardins actively contributes to access to financing and capital markets, actively contributes to business succession and transfer, and supports structural projects that strengthen the productive capacity, innovation and competitiveness of the regions.
In 2025, for example, Desjardins supported 1,464 business transfers with $3.3 billion in new advance financing. These business transfers allow viable businesses to continue their operations, keep jobs and maintain essential expertise in communities. These transfers go well beyond a simple financial transaction: they are a direct lever for economic continuity, improving productivity and preserving entrepreneurial know-how.
We also have a range of financial tools, dedicated investment funds, as well as a structured donation and sponsorship program to promote entrepreneurship, stimulate innovation and support business succession, thereby contributing to Canada’s economic vitality.
The current economic context poses a number of significant challenges for Canadian businesses. Desjardins can play a structuring role in that regard. Thanks to its cooperative model and prudent management, the Desjardins Group is able to maintain access to credit, including in times of economic downturn, so that it can support businesses in long-term structural projects, even during times of uncertainty such as at present.
We actively support investments in innovation and productivity, play a key role in business succession and transfer, and help to direct capital toward a more sustainable economy, including by integrating environmental, social and governance criteria into our investment and funding decisions.
In addition, Desjardins has the necessary tools to offer its services and support to businesses across Canada, in keeping with the realities of each market and region.
In conclusion, the Desjardins Group is a trusted economic partner that contributes directly to business resilience, improved productivity, innovation and the long-term strength of the Canadian economy.
Thank you for your attention, and I look forward to your questions.
The Chair: Thank you, Mr. Bourgeois and Mr. Brun. You are the first non-governmental institution we have invited after seven meetings. This is now our eighth meeting, but it was voluntary. We wanted to know what the various stakeholders had to say to us.
I would also like to take this opportunity to point out to those watching us that the Senate recently marked your one hundred and twenty-fifth anniversary through an initiative of our colleague Senator Moncion, an initiative that a number of senators, including Senator Loffreda and myself, have joined.
We have about 45 minutes for questions and answers.
[English]
I will start with our deputy chair, Senator Varone.
Senator Varone: Thank you, and welcome. I’m going to tell you a story. Growing up in business, I had the benefit of working with people who were a lot older than me. I asked one — and I’ll call him a mentor — what the key to life was. He said, “I have a good doctor.” And I kind of listened to that, then asked, “Okay, what is the key to your business success?” He said, “I have a good banker.”
Back then, the edict of banking was “know your client,” everything about that client, but that seems to be lost in the banking landscape today, in a world of profit, loss and other equations that wrap up into the tick-and-check model of lending money.
Where does Desjardins fit in the landscape of “know your client,” where you know not just their profits and losses, or P&L, but their creativity, their business and what they are trying to achieve? How do you lend to them? And, more importantly, how do you train your lenders, the bankers themselves, to follow that edict if they do?
Mr. Bourgeois: Thank you, senator. That is a very good question. I like that question because we pride ourselves at Desjardins on creating a culture of proximity with our member clients or entrepreneurs. That proximity creates a relationship-driven business model and not a transactional business model.
When I mentioned that we look at short-term issues but with a long-term view, that is exactly what entrepreneurs need: not a financial institution that reacts to short-term pains in the market or short-term problems within an enterprise or a business, but someone who sees the long-term vision of the business owners or managers and is able to accompany them in their projects.
You are absolutely right. Sometimes it feels very transactional. In the socio-economic or geopolitical context of the past two years, and even when we were in a rising interest rate environment and, before that, the pandemic, a lot of financial institutions lost sight of the people behind the businesses. It was very much a numbers game versus a project of building a society with good businesses and helping them through the rules of the economy or the pains that they have internally.
So it is a very good question. I’m responsible for the business services group. The way I like to think of our 1,000 account managers on the ground is that they are business partners to our entrepreneurs and business clients rather than service providers.
When we say “long-term vision,” that is when the going gets tough. We make sure we stay close and do not throw the keys away and say it’s out to special accounts or into a scenario of recovery. We try and stay longer-term with our clients even when the going gets tough. That is the way we differentiate ourselves.
Senator Varone: Just as a quick follow-up, these 1,000 bankers that you have that are in the business of lending are coming out from either university or upper-level college courses where “know your client” is not taught. Is there a Desjardins university course that you send them through to learn that edict?
Mr. Bourgeois: We have training programs that are pretty exhaustive in terms of what we expect the account managers — call them the first-line people at Desjardins — and how to interact with our member clients: to create client intimacy, develop a proximity and understand their needs, not just the business needs but their personal needs. So, yes, we do have training that touches on that.
In my role, I go across the country three times a year to sit down with our account managers and with clients to ensure that posture is the right one and that what we train them for and what we say we want them to do actually happens on the ground. It is not always perfect, but we try hard to make it right.
Senator Martin: I have a few questions. Thank you.
Thank you so much for your presentation. There are a few things that stood out as you were speaking, like the fact that what you tried to provide is access to capital in challenging times — and I know these are challenging times, but we have had others and there will be more — and that you have also worked with businesses for their entire life cycle. I was very curious about how you do that so effectively. You mentioned the first point of contact and the relationship that you are building, the client intimacy, but I really wanted to understand an example of a life cycle of a business you have seen.
The other thing that I heard was the succession transition, because I think that is a big issue right now. I know that in British Columbia, I’ve met different businesses, as well as people working in that space, to help with transition.
So those are topics of interest to me and not so much a specific question. I have another one related to something else, but would you please speak to the three topics that really stood out for me?
Mr. Bourgeois: Thank you for your question, senator. When we talk about the life-cycle relationship, in our own terms, we call this “business continuum.” We have the capabilities to fund ideas, to accelerate enterprise development, accelerate through investment and then to lend through the different cycles as a small business, medium business and large business. Eventually, when you touch on business transfer or succession planning, from a business standpoint, that, to us, completes the cycle.
So we make sure we have products and services and that our account managers on the ground, or our investment managers — because we also do investment as well as financing — are in tune with our product offerings and can see the needs of our business clients and able to answer those needs from the earliest point, when they come to do business with Desjardins. We’d like to have a larger market share, but there are competitors out there, as there should be. And then we try to keep that relationship as long as we can to take them to the next level through a business transfer.
So we have had numerous examples, but probably the one you would know best is Cirque du Soleil, when the first loan to Guy Laliberté was from our bank in Charlevoix, a $15,000 loan. That led to the business being sold to a private equity group for a couple billion dollars. We were there from the beginning, the inception, the loan financing and the investment through the life cycle to the transfer. That is just one example out of the 436,000 clients that we have.
There are many examples like that, where we were there at the beginning and tried to stay to the end.
To your point on business succession, that is one issue that really is front of mind for us because business succession is being able to — and I’m not going to try to stroke a nationalist chord here — keep a business in Canadian hands.
When a business gets to a certain size, call them medium-sized businesses, with a good record of profitability and good-sized assets, they become targets for investments from Canadian investors — that’s fine — or to be sold to Canadian entrepreneurs or businesses, and that’s fine. What worries me is sometimes we don’t catch them fast enough, and they are being sold to interests outside of Canada. That is where there is consolidation. When there is consolidation in a difficult market, sometimes those assets, probably in a region that needs jobs and those assets, can be put at risk.
We are very mindful of the role that financial institutions need to play in business transitions. Sorry, I need to speak faster, but we are playing that role.
The Chair: I don’t want to interrupt you.
Senator Fridhandler: I’ll give you more time because my question identifies the big issue around businesses and their investors looking at liquidity. Not all businesses are mom-and-pop and family owned on succession. Some have investors and expect timelines — whether it is five, seven or nine years — to a liquidity event, and we want to keep it here. We do want to be nationalistic. That is the goal of this committee: to keep businesses here and keep productivity in Canada.
I’m glad to hear it is an issue for you, but what more needs to be done to facilitate that? We have heard different things, but do you have things that would help you make it easier to keep these businesses here?
Mr. Bourgeois: It is a good question, senator. I could take 30 minutes, but Mr. Chair will not give me 30 minutes.
There are so many levers that could be used. When we have some of these committees in Montreal or in Toronto — or even in Alberta or Vancouver — it always comes back to people being mindful that there are investors and business owners who can take that business back in Canada.
When we put a process in place, it is to make sure that the current business owners or investors are sensitive to that issue. Because once you have private equities that are pouring into a transaction, they drive the process. We need to be mindful that they have the say on the final transaction, but they need to be sensitive to the issue.
There are other levers. We have talked about fiscal levers. If there is a capital gain and it stays in Canada, can you actually give a break on capital gain? That’s one, especially with individual business owners. When it is private equities or pension funds, there is a different taxing context, but, yes, that could be one lever.
We often say that between the different pension funds or institutional investors in Canada, there should be a common view as to what we want to keep and what actions we should take when there is an opportunity like that which presents itself. We need to be mindful of that when you move into the smaller business categories, because those are the ones that we do not see or hear about.
Sometimes it is one business that makes a village thrive. Owners of that business need to be sensitive to ownership transfer outside the country. That’s when you come back to fiscal issues and probably incentives to keep the business over time with investment credits and tax credits for productivity gains that can increase the value after it has sold.
There are many ways to do this. There are many committees that have written papers on that. I’m willing to share on that in more detail.
Senator Fridhandler: If you would like to, please submit a follow-up on your three or four top things with respect to the fiscal regime that we could do in this country to change up and keep these businesses here.
Mr. Bourgeois: Absolutely.
The Chair: If you can share that with the clerk, it would be very useful, and we can share that with our colleagues.
Senator C. Deacon: Thank you, Mr. Bourgeois and Mr. Brun, for being with us today.
I want to ask about three programs that you are delivering in cooperation with the federal government to understand why they are divided into three different programs, what their support is and how they are working for companies in filling a hole.
The three programs are the Canadian Small Business Financing Program through Innovation, Science and Economic Development Canada, or ISED; the Business Accelerator Loan Program through the Business Development Bank of Canada, or BDC; and the Trade Expansion Lending Program through Export Development Canada, or EDC.
Can you give us a bit of an overview of those programs and how well they work, particularly for the organizations you are lending to, and what they provide you, as a lender, to give you greater confidence than you would have otherwise?
Mr. Bourgeois: I will take them one by one, because we work with Crown corporations, BDC, EDC and any other government agency that wants to put a program in place to help certain sectors, like the softwood lumber industry recently or during the pandemic.
Often, what happens is that there comes a time when the risk in a business becomes too great for a financial institution that takes deposits to put out those loans; it is too much risk to take. We are looking at — sometimes with BDC — loan sharing or a guarantee of a part of a loan.
With EDC, there are many programs, but even for special cases, we go to them and say, “This we cannot do. Can we work together?” And we do a one-off.
On collaboration between BDC and EDC, particularly, we have people that work with these people every week, sharing information and files and making sure that we have the right answer for the needs of our —
Senator C. Deacon: And are those specialized, centralized people who deal with them, or is it generalized across your organization?
Mr. Bourgeois: Well, they are centralized by different business lines. Small businesses would have three or four people that interact, and mid-sized businesses have three or four people. But everything congregates in the adjudication process. Everything flows up to a few people who can actually help in those discussions or decisions.
With EDC, especially right now, when a lot of organizations or enterprises are looking to diversify their markets, we work with them. They need to provide us credit if we are going to lend against an order coming from a country, or if it is a client we have never heard of. We work closely with them to provide those guarantees that actually provide credit to the enterprise or the small business that needs them.
I think one good positive that the pandemic has given us is being able to organize ourselves quickly and being proactive with the different organizations you mentioned to be able to find solutions quickly to issues that are either punctual, like the softwood lumber crisis, or structural, like the tariffs that may last for another couple of years. With softwood lumber, it was punctual when this happened, but the tariffs are going to last, and I don’t think we are going to need the different — to continue supporting those businesses diversifying their markets.
Senator C. Deacon: Just quickly, so this works for you very well as an organization, and it works for the federal government. Do you have data to back that up and that shows how well this is working for both? Perhaps you could share that with the clerk.
Mr. Bourgeois: Absolutely.
Senator C. Deacon: I would really appreciate that, if you could. Thank you.
[Translation]
Senator Henkel: Welcome once again, gentlemen.
Here is one of my questions. Given the scale of the SME succession challenge in Canada, employee ownership trusts have been identified as a strategic solution, but their success depends heavily on access to financing. Do you believe in this model, and do you intend to play a central role in its development?
Mr. Bourgeois: Very good question. Yes, absolutely. We believe in it because we support the vitality and sustainability of that model. Again, these are never simple funding structures. We know them well because we are part of that ecosystem. We fund a number of them. The majority of them are very small.
The organizational structure of an organization cannot fix a company that is not profitable or viable. Often, we try to mask one with the other. We’re currently working with an organization — I won’t name it, because it’s a large organization — that will transform into an employee collective, with the goal of preserving human capital and intellectual property in Canada in the hands of its workers. I think that’s commendable, and it works in that case. It is a challenge, but we have to be open to different funding solutions. Sometimes it’s just not feasible, because companies cannot function with a model of that scale.
Senator Henkel: I will now talk about women entrepreneurs and microfinancing. Women entrepreneurs, in agriculture or in services, such as food services and retail businesses, often have much smaller businesses. We know that. They have more fragmented incomes and less linear pathways. These realities do not match traditional credit criteria well. Your microfinancing program, in which 55% of the beneficiaries are women, has a positive record, with a survival rate of 67% after five years and revenue growth of more than 36%.
I would like to know the specific characteristics that make that program successful. Why are other institutions not following suit?
Mr. Bourgeois: Very good question. Do I have 30 minutes? No.
The reason it is successful is that it is well structured. Microfinancing is really a specialty. We need to be able to provide support to businesses or individuals who apply for that financing.
In many cases, those businesses are based on an idea or initiative that is very closely tied to the people themselves. So it requires proximity and an ability to provide financing or recognize the potential in a different way than in the case of traditional credit. We have teams that do that. It is part of Desjardins’s DNA to work with all levels of business.
Desjardins has an international development division that provides microfinancing in a number of other countries. We do it here, and we have many programs that provide grants or donations and sponsorships. It’s not an isolated program; it’s a life-cycle program for a business. So it is well supported with the help of all Desjardins resources. If it were just a microfinancing program alone in a single organization that wasn’t a financial entity, I’m not sure it would have the same success, because we infuse it with our best practices, resources, support for those businesses, mentoring, and so on. That affects success.
The Chair: Thank you. Senators are well prepared for our witnesses and they have statistics. We don’t want that to make you nervous.
[English]
Senator Wallin: I’m asking for an opinion, not an answer or documents to be sent later. The Bank of Canada has recently been talking about the fact that we’re losing a key demographic: young people and young people who are entrepreneurial and with money.
When you look at the stats, we’re losing billions of dollars of capital. They’re not just leaving the country — they’re fleeing the country. As you referenced earlier, we have a lot of new companies or SMEs that reach $1 million or $2 million in valuation and then sell or leave. Can you explain why this happens in Canada?
Mr. Bourgeois: I’ve been a commercial banker, a corporate banker, an investment banker and a merchant banker. I’ve done all the banking trades. There was a time back in the late 1990s and early 2000s when the venture capital market in Canada, and when I say “venture,” that is not just the private, but even in the capital markets — we had pools of capital investing in smaller companies, some without revenues but with great potential.
Those pools of money were institutionalized over time, and that venture capital was reduced by quite a bit, so much so that today the venture capital ecosystem that exists is a fraction of what it was 20 years ago. That impacts the financing of small businesses.
And when I say “venture,” I mean early-stage investing up to development capital where it’s growth and more mature businesses.
So a lot of these businesses that are growing right now get to a point where the financing gets harder and harder to get. If you were able to get venture capital and you want to get the second, third or fourth round, it’s more difficult to get than to sell.
If you have an idea with potential, sometimes people say raising the next round of capital will be too complicated and they would rather sell. That’s an issue in itself.
In Canada, we need to look again at bolstering what we do in the venture capital area.
Senator Wallin: Is it the financing structure or just the risk aversion of the institutions?
Mr. Bourgeois: The availability of risk capital, absolutely. The sums that were available to invest in venture capital were institutionalized in pension funds, which take less risk.
Senator Wallin: So what are the solutions to that — other than Desjardins?
Mr. Bourgeois: Tax credits. Bigger tax credits for riskier investments. With Desjardins, we have fiscal funds where there is a tax credit for the investment; that’s one thing. But there needs to be a bigger tax credit if you want to spur or spearhead more investment into the venture area. It needs to be bigger than that.
Senator Wallin: Sometimes you get the sense it’s attitudinal, it’s about the attitude of financiers, institutions but also entrepreneurs. They say, “Get me to $1 million or $2 million and that’s good.”
Mr. Bourgeois: Yes, because the next round of financing is — well, sometimes it’s a mindset, too.
There are business builders and there are business — I’m not going to say it, but they build a business and want to flip it quickly. That is one kind of investor.
Business builders will usually try to go through the cycle, even though it’s tough. Sometimes we provide financing. It’s not ideal but they get through it. Others say it is not for them. It’s a mindset and the availability of venture capital.
The Chair: Thank you. The floor will go to a former banker, Senator Loffreda.
[Translation]
Senator Loffreda: Welcome to the committee, Jean-Yves and Bernard. I often bring up Desjardins when we’re discussing the competitive landscape in the finance sector, especially in Quebec, where you have a significant share of the market. Well done. You heard our comments. Congratulations on your anniversary and your success. It’s worth highlighting.
Most of our businesses are SMEs, most of your customers are SMEs. Sometimes people try to complicate things, but I want to keep things simple, so I have a simple question for you. In the current environment where many Canadian SMEs have trouble accessing the capital they need for growth and productivity — Canada has a productivity problem — how does Desjardins operate in the face of the main barriers to financing, particularly for scaling businesses? What concrete solutions can you propose to better mobilize capital in Canada? If we look at the current tax and regulatory frameworks, are we helping or hindering Canadian businesses’ access to capital? Are there any adjustments you would recommend, or a silver bullet? My colleague mentioned employee ownership trusts.
[English]
I have been an advocate of employee ownership trusts for many years. We have the $10-million capital gain expiring soon. We haven’t renewed it yet.
[Translation]
It needs to be renewed as fast as possible to encourage businesses to find solutions. There are some thoughts and questions for you.
Mr. Bourgeois: I would say that, for a few questions, I usually talk for two minutes. You make a very good point. The most important thing when it comes to productivity and innovation investment — many financial institutions do this and so do we — is to provide more beneficial terms and amortization over a longer term. What comes up a lot, though, is the amortization of those expenses. A business should be able to write them off in the first year, so it can immediately reinvest those tax savings. People have been saying that for a long time. Everyone’s talked about it. Just change that, and I think innovation investment programs would see a 25% increase in a single year.
We’ve been saying that for a long time.
Senator Loffreda: That’s a good answer.
Mr. Bourgeois: On that point alone, if you amortize the expense, you don’t get the tax savings right away. A business gets no tangible savings to help with cash flow when investing in innovation, but that’s what it needs. We can provide financing, there can be investment, but there needs to be capital movement coming from the scaling organization, as you said. If businesses can make a clearly defined investment in innovation and write it off the first year, as with Desjardins, they can pursue modernization, but they have to write it off every year. When it comes to investments in innovation infrastructure, equipment, technology and even employee processes, there should be a specific framework for writing off the expense right away.
The Chair: On that, Mr. Bourgeois, you have tax experts who could help us with our recommendation to address the difference between the U.S. and Canada. That would help us a lot with our recommendations.
[English]
Senator Yussuff: Maybe I’ll start with something more organic: the history of Desjardins and the context of its creation.
It was a membership organization in Quebec; it has an organic relationship with people who live in the community. Today, it has expanded across the country and provides a variety of services.
But that orientation has informed you in a different way in how to go about serving your clients because that is the reality of your growth and the reality of the success of Desjardins.
What experience can you share that continues to be successful in your approach, because you’re unique to your creation?
If I were just a regular customer, then decided to become an entrepreneur or a small business, I would have had a relationship with you before I became an entrepreneur. That would inform you about our relationship, and then, of course, it goes to another level.
I have two quick questions. Start-ups are unique in the context of SMEs in that is where the most risk is involved; businesses are not established, they don’t have a history, and then there is growth and the export — if they are involved in export.
So, given the three levels of challenges that SMEs face in terms of capital and refinancing, what has your history taught you that is unique to Desjardins versus what we’re seeing from others who have said, SMEs, despite all of the good things you’re doing, still have a crisis around them accessing capital? If we don’t fix this, given they are such a large percentage of the economy now, we are going to be in a bigger crisis. If they can’t grow and expand, how do we create employment and so on?
Mr. Bourgeois: That is a very good question. The history of the origins of Desjardins, and why it was created, to provide credit to those that couldn’t get it or couldn’t get it on good terms, is still true today.
When we see an issue, whether it is in a region or a company that has special needs, we are not trying to fit the needs of a business into our product offerings; we are tailoring our product offering to the needs of businesses, and that comes with a lot of challenges. So we have a regulator that looks at what we do and says, “You have so many exceptions you can do,” so we are in “exception mode” all the time and trying to tailor solutions to businesses.
That is one. That is true for financing and for investing. Right now, if you look at the investment capabilities of all the different funds in Canada, a lot of funds, when they have success, go to the next layer. They are going to invest a minimum of $25 million in a business, but the businesses that need between $2 million and $5 million in investment are still there and still exist. So the funding is a bit like venture capital; they tend to move up when they have success and grow in size. If you have a $500‑million fund, you can’t do 100 investments. You have to do lesser investments.
So when we see that, we are creating funds to invest in smaller businesses because we see a need, and that is providing capital to those who can’t have access to it through normal channels at a decent price.
Extend that to affordable housing. It was not our issue to tackle, but we tackled it because in the regions, it affected the workers of our clients. If you cannot get good workers, who are fleeing the regions because there is no good housing, we are not helping our businesses. So that is another way of helping businesses through our origins. Sometimes it is not just the financing but the solutions around it that make a difference.
Senator McBean: I would like to apologize. I missed the testimony when I came in. I came with questions, though, and if I’m asking a question that you’ve answered already, please forgive me.
I did like how you spoke about your need to deliver short-term with long-term views, because I think that is what we do here at the Senate too.
But SMEs and entrepreneurs often cite access to affordable and flexible credit as a barrier, and we’ve been talking about your expertise and success here.
What trends are you seeing in this area? What innovations are you seeing in borrowing needs, and where are the biggest gaps?
Mr. Bourgeois: One thing that is clear is that if you look at the larger corporations and medium-sized corporations, they have all the access they need.
A lot of people often say we are going to cater to where the economics make sense. Most of the workers are in the — forget the MEs — small-sized businesses, and that’s where we need to go. We need to be able to give them access to what medium‑sized businesses have in terms of credit because that’s the only way they are going to grow. Sometimes there are not a lot of financial institutions willing to actually give the same types of credit facilities in terms of margins on assets, equipment, inventory or receivables, or to just give the same length of terms because a small business is riskier than a mid-sized business, so sometimes the terms tend to be shorter.
So the innovation needs to be an adaptation of our credit and investment criteria to the reality that the economy is now — it has always been that way, but more so an ever. We have mentioned there is a lot of creation of new businesses and a transfer of businesses into new entrepreneurs, not consolidation into a bigger enterprise.
We need to make sure that our financing and investment criteria go down to the needs of smaller enterprises. Those two that have just terms and credit conditions need to flow down to these businesses, which we’re trying to do, but sometimes we have to do it with the assistance of BDC and EDC because the risk is too big.
So we need to continue to work with the Crown corporations to actually increase access to credit to these smaller businesses. When we say we have 436,000 clients, I would say 270,000 are small businesses.
Senator McBean: Do we do them a disservice by clumping them together all the time with the medium-sized ones?
Mr. Bourgeois: Yes, we do. When you say “SMEs,” to me, it’s not addressing the right issue. It’s the small businesses we should have our eyes on. Medium-sized businesses usually have access to the credit that they need.
Senator McBean: Thank you very much.
[Translation]
Senator Ringuette: Thank you for being here, gentlemen.
We heard from a Fonds de solidarité FTQ representative. Are you one of their partners, like the BDC?
We also heard from people at the big banks, who basically told us that the investment funds they recommend to their clients are ones that are already structured, not necessarily ones that are geared towards SMEs or individuals.
Is there something we could do with tax-free savings accounts, TFSAs, geared towards individuals? You’re in the field, so I’m putting the question to you; we talked about venture capital, accelerated investment in relation to tax. What more can we do regarding TFSAs and individuals? A regional component could also factor into the equation. You are the specialists, so what do you suggest?
Mr. Bourgeois: I don’t know whether this would be specifically geared towards a TFSA. Let’s look back at the 1980s, when we saw the emergence and major growth of big companies such as Couche-Tard, Garda and CGI, which benefited from the Quebec stock savings plan. Companies also had access to a tax credit if they met certain requirements. It’s a bit like the mining development tax credit that still exists, the popular flow-through shares in Quebec. Those programs gave rise to some incredible companies. Tax-advantaged fund investments are one way to look at it, because they are tax credits for investors. Given the context I described earlier, where venture capital is significantly lacking, these kinds of tax measures may be worth considering in the current environment.
As I said, in the early 2000s, there were a lot, and even in the 1990s, there were a number of funds, many tax credit programs that supported the creation and growth of companies. They are all gone now. A rare few remain. Bringing these types of programs back would be good.
Senator Ringuette: Federally?
Mr. Bourgeois: It was provincial, but some had a federal component. I can’t remember them all.
Senator Ringuette: I would like that. We could do some scrounging and see what we find.
Mr. Bourgeois: Some great tax credit programs were created and were in place previously.
Senator Ringuette: Thank you.
[English]
Senator Pupatello: As we are at the end, I’ll also add a little story. A successful businessman in Toronto said he spent half his career having to take bankers out to lunch. It was a critical part of his business, and he finally realized he’d made it when they finally took him out to lunch. I don’t know how many people you take out to lunch, but I always remembered that story because it tells you the balance of power in these relationships that you have with your clients.
My question is around the Competition Bureau, which launched a study in January about the system of banking, the ability of small companies to switch bankers and the difficulty in manoeuvering within the banking system for these companies to access financing. The smaller the organization doing the lending, the more expensive the lending — that is what I have generally seen.
Even if they have opportunities to go outside the general financial institution sector, they are paying a lot more to borrow money.
I have always marvelled that the banks have created an environment to have zero risk in their lending because they charge for everything. They charge to hold my money; they charge to give me my money; they charge to let me move my money. The fees are outrageous. I want to come back in another life as the Competition Bureau, or something similar, because it’s been so infuriating to watch. It is so commonplace and accepted that you pay every step of the way in the banking system. That has certainly been my experience.
You started out in your opening comments talking about needing more competition. Is it your view that the banking system needs more players?
Mr. Bourgeois: The Montreal market is probably the most competitive market there is in Canada. This is where Desjardins holds a lot of market share. There is National Bank, and then you have three banks trying to — even for a large corporation, the cost of credit in Montreal is lower than in Toronto, believe it or not.
However, it is true that the cost of credit for small businesses is higher than for large businesses. It is a relationship to risk. It’s true that it is a service business in terms of the services we provide. Could there be more competition? It is quite competitive already, but you’re hitting on one point: The ability for a client to move from one financial institution to the next is quite complex. That sometimes mitigates access to cheaper alternatives. It is complicated to change accounts and change your banking.
Senator Pupatello: You seem to have a history of working with government and government programs that are assisting small companies. The dilemma companies have when working with governments, for all these programs they create, every program over decades, the government is so risk averse that they call on the company to have five years of financial statements, all kinds of credit history, et cetera. These are things that are really not realistic for start-ups ready to launch, trying to launch and need that first big customer.
Given your involvement in the banking industry, or even your company particularly, how would you influence how they go about the business of selecting who they are going to help? Where can you reduce that requirement for small businesses to provide material they simply don’t have at that stage, but at least provide the risk benefit for the government if they are going to make that choice?
You see where they are. They have a risk. Publicly, they can’t be seen to fail and give money to the wrong group. Businesses, on the other hand, absolutely need help. I don’t know if that is a private sector view of who to help. You seem to have some history there.
Mr. Bourgeois: Some of the programs that we talked about with a lot of Crown corporations actually address some of those issues, and I don’t think we go that far into smaller businesses. It is something that should be addressed. We can do programs with BDC or EDC to help us take more risk in financing smaller businesses, as you say. It is probably the only way to look at it. Our rules, taking depositors’ money, we can’t take undue risk with some of that.
Senator Pupatello: What size companies are those?
Mr. Bourgeois: Companies that want $500,000, $1 million in financing. When you see start-up incubation and acceleration, those loans are from $500,000 to $5 million. There are not a lot of players.
The Chair: As a former Desjardins employee and former trade minister, I know your business model very well, so I will take a pass on my question.
Senator Varone: My question is about definitions. Our study is about access to capital by SMEs, and you touched upon it by way of Senator McBean’s question. When I start searching for the definitions of “microbusiness,” “small business” and “medium-sized business,” Google spins out 20 different versions of the definitions. In your experience, how do you rate them, both in terms of the number of employees and the value of business that they do, and where would you rank them?
You don’t need to answer right now.
Senator Fridhandler: When you say venture capital has been institutionalized and then you point the finger at pension funds, I was wondering if you were just being polite and not talking about the institutionalization and movement to simply wealth management and all the money to banks, and about how they are the particular culprit here, along with pension funds.
Second, I would like to hear more about your venture capital investing operations and how you integrate that with the scale-up of SMEs. I use maybe the narrow definition on the “E” side of “SMEs,” but happy to take that in writing.
Maybe the first comment, “institutionalized” — the banks.
Mr. Bourgeois: It’s mutual funds and exchange-traded funds, or ETFs; it’s all the programs to manage investments that are no longer individual investors investing into enterprises or funds. It is in different vehicles that are not oriented toward venture capital. That is basically it. Back then, there used to be pools of venture capital. There is not so much of that anymore.
To your question on small businesses, we look at them in terms of number of employees, amount of loans and amount of revenue. It is a complex diagram. We have enterprises that have no revenue, hundreds of millions of dollars in loans and only 50 employees. You can guess which sector they are in. It is complex.
[Translation]
Senator Henkel: This is something I’m personally curious about. It seems to me that, since you’ve been around 125 years, you no longer have to prove your methodology. However, I’m going to turn to Mr. Brun, the Vice-President of Government Affairs. I’m sure you are involved in a number of files.
You’ve been around almost since the beginning, especially in Quebec — you are a Quebec company — but you’re also present in Ontario, serving Franco-Ontarians. In terms of delivering your cooperative solutions, what challenges and barriers do you face because your presence extends all over Canada? My sense is that you may run into barriers with the different levels of government.
Senator Loffreda: That’s a good question, because given your market share in Quebec, you have a lot more competition.
In a context where increasing domestic investment is vital to improving access to capital and supporting SME growth, how can Desjardins and other financial institutions help to encourage more domestic investment in Canadian SMEs? You’re connected to SMEs and entrepreneurs everywhere.
We’ve seen less and less domestic investment in Canada over the past decade or so. It’s a bit scary to see the decline in investment in Canada.
Mr. Bourgeois: On that front, we work with a number of partners to create funds that meet a need the market hasn’t, for smaller investments. We do that.
To come back to the wealth management issue, I would say a number of financial institutions have done it. We are also in the process of creating mechanisms to channel funds in our private bank programs or private funds back to the companies in the form of management by a financial institution.
We are in the process of creating a pipeline to bring these investments to companies that really need them.
We try to direct capital to get back to that model. It’s a very good question. I think all the financial institutions do more or less the same thing.
Mr. Brun: I want to take the opportunity to thank you all for recognizing Desjardins Group’s one hundred and twenty-fifth anniversary.
When Desjardins was set up to undertake this kind of lending activity, it just didn’t exist. The merchants were the ones lending money to individuals. In companies, it just didn’t exist.
The system was built throughout Canada, and even in the U.S. It’s just that there was significant adherence in Quebec, which was possible with the federal system, but that federal system has its limits. Yes, wealth management insurance activities can be undertaken all over the place.
As far as business lending goes, there are a number of opportunities.
Shortly, you’ll be hearing from the credit unions, and they’ll explain the system’s foundations. There is certainly an opportunity for greater fluidity in being able to do business everywhere, to grow and to have greater adherence. That would help a lot. That would certainly benefit businesses.
When we talk about how we can help small businesses more and what can be done, I think there’s something we don’t mention enough: the crucial role of governments, especially the Government of Canada.
As my colleague pointed out, small businesses have a credibility problem when it comes to accessing contracts. While there is the whole tax credit dimension, there is also the awarding of contracts. The government seems to be open to that, but there are certainly things it can do. In awarding a contract, the government gives that type of business vital credibility, above all.
The Chair: Thank you very much.
[English]
Senator C. Deacon: We’re talking about good bankers. Good bankers in my family were ones who collected on a loan, kept the business in operation and never should have given that loan in the first place.
If you can, please answer after so that you can answer Senator Yussuff’s question. Please send us something in writing.
Do you partner with equity investors in terms of granting at a certain level? How are you working with your companies? How do you do that? Is there anything that you can describe publicly about the work that you do with equity investors, how you select them and how you choose the situation? That, to me, is an important combination that allows you to have more confidence and security. If you can provide anything around that, that would be helpful.
Senator Yussuff: Recently, the government amended legislation to make it easier for credit unions to be more active federally in this sphere, and I think that is a good thing. Obviously, it can provide more choices and opportunity.
Given your experience, and you certainly have mastered your own destiny, what advice would you provide to this committee, given that we could see more credit unions engaged nationally across the country, in meeting some of the needs that small businesses are struggling with?
Mr. Bourgeois: Your question on the equity side, at Desjardins, we do have a fiscal fund, and with other funds it is about $4 billion of funds. When we invest, we often co-invest with other investors, whether they be Canadian — our friends at Desjardins Financial Security Investments, or DFSI, or Fondaction. Usually, we are trying to co-invest with people with the same values and the same investment time horizon.
These funds are evergreen funds. We understand they are seven to nine years out. Sometimes we are much more patient than that. We try to invest with people that have the same mindset, but we co-invest with a lot of co-equity investors in small- and medium-sized businesses.
To your point, the credit union ecosystem is a big family for us. We help them at very different levels, whether supplying them with services, products, financing or infrastructure to help them grow.
I think what the Minister of Finance is doing is a good thing to help them and give them the chance to continue to the federal level and have access to the rest of the Canadian market and increase competition.
We just caution people that it’s not because you have access to a bigger market that you become better overnight. We all have to work on our strengths, our infrastructure internally and our capacity to serve our member clients better.
The ability to go federal from a provincial regulatory status is a good thing, but I think there is still a lot of work to be done in the credit union ecosystem to make it stronger. As credit unions, Desjardins being one, we need to work together to do that.
Senator Yussuff: Thank you.
[Translation]
The Chair: People are keen to understand Desjardins’s model, and your comments are very helpful. We look forward to your emails and the additional information you’ll be providing. We know you have very busy schedules, so we sincerely appreciate your coming here to Ottawa. On behalf of my colleagues, I want to thank you.
Welcome to our second panel. Participating in person, we have Sabena Sandhu, Manager of Policy at the Canadian Credit Union Association.
[English]
We also have Mr. Bill Lomax, President and Chief Executive Officer, First Nations Bank of Canada.
Mr. Lomax, as you are appearing by video conference, should any technical challenges arise, particularly in relation to interpretation, please signal this to me or the clerk, and we will work to resolve the issue.
I think each of you has prepared opening remarks. Please, no longer than five minutes. After that, we will go to questions.
Sabena Sandhu, Manager, Policy, Canadian Credit Union Association: Thank you for the opportunity to appear before you today on behalf of the Canadian Credit Union Association, or CCUA. My name is Sabena Sandhu, and I’m CCUA’s Manager of Policy.
The CCUA is the national trade association for Canada’s credit unions and people’s banks, excluding the Desjardins Group. While credit unions are small compared to the largest banks, the sector collectively represents a significant part of Canada’s financial services landscape. With approximately $330 billion in assets, Canada’s 160 credit unions and people’s banks represent a 6.4% share of domestic assets held by all Canadian deposit-taking institutions and serve more than 6 million Canadians. Credit unions operate from 1,600 locations nationwide.
As you know, while most credit unions are provincially regulated, there are four federal credit unions, notably, First West Credit Union, now Tru Cooperative Bank. It became a federal credit union on April 1, 2026. On the same date, ABCU Credit Union in Alberta amalgamated with Innovation Federal Credit Union.
What sets credit unions apart is their model. They are member-owned, community-based and purpose-driven. Their focus isn’t on maximizing shareholder returns but on serving their members and reinvesting in their communities. In many communities, particularly in smaller towns and rural areas, credit unions are increasingly important, as banks increasingly withdraw or reduce their physical branches. In fact, when you include the Desjardins Group, credit unions are the only financial institutions in over 1,900 communities across Canada.
Credit unions have long been strong partners to SMEs in urban and rural markets and maintain close, relationship-based ties with local business owners, responding to economic conditions in ways that are often difficult to replicate at scale. Together with Desjardins, Canada’s credit unions support over 780,000 SMEs in diverse industries and sectors. Of Canadian SMEs, 21% identify a credit union or people’s bank as their primary financial institution, representing a larger share of the market than any of the Big Six banks.
Despite their important role, credit unions are often at a disadvantage relative to larger banks and Crown corporations engaged in business lending. Unequal access to public programs, differences in capital treatment and other regulatory barriers can limit credit unions’ ability to compete. These differences affect how efficiently credit unions can deploy capital, the level of risk they can take on and their ability to scale SME lending, particularly as businesses they serve grow or operate across provincial borders.
For example, federal programs, such as the Canada Small Business Financing Program and the Canadian Agricultural Loans Act, are intended to expand access to credit and support competition. However, design features, administrative complexity and, in some cases, misalignment with modern financing practices can limit credit unions’ participation in such programs, thereby disadvantaging credit unions and their members and reducing program effectiveness.
Similarly, credit unions are at a disadvantage when competing against federal Crown corporations, as Crown corporations can benefit from structural funding and capital advantages that can create an uneven competitive dynamic, particularly in specialized lending markets. It is, therefore, critical that Crown corporations operate in a manner complementary to credit unions and other financial institutions rather than compete with them.
Regulatory barriers that limit credit unions’ ability to serve SMEs across provincial borders further constrain competition. While banks can serve customers and businesses around the country, provincially regulated credit unions cannot. While the process for federal continuance under the Bank Act will be improved through the Office of the Superintendent of Financial Institutions’s recently introduced fast-track process, it remains resource intensive and might not be an appropriate strategy for all credit unions. The lack of provincial legislative frameworks that contemplate broad extra-provincial operations, as well as additional regulatory- and supervisory-related barriers, continues to limit the ability of credit unions to compete, grow and serve SMEs beyond their provincial borders.
Taken together, these factors shape the competitive landscape for SME financing in Canada.
Effective competition is not simply about having multiple lenders in the market; it also depends on whether those lenders can operate on a level regulatory footing, serve businesses through various stages of development and respond flexibly to local and sector-specific conditions.
Addressing these issues does not require reducing standards or weakening oversight; rather, it is about ensuring that policy, regulatory and program frameworks evolve to support a diverse and competitive financial ecosystem in which credit unions can continue to play a meaningful and growing role alongside other financial institutions.
Thank you again for the opportunity to be here today. I look forward to your questions.
The Chair: Thank you. We will go to Mr. Lomax for five minutes for opening remarks.
Bill Lomax, President and Chief Executive Officer, First Nations Bank of Canada: Thank you.
[Indigenous language spoken.]
Good afternoon, ladies, gentlemen and Two-Spirit friends. Thank you for inviting me to join you today.
My name is Bill Lomax. I am Gitxsan from the House of Luus, and my hereditary name is Maskaluuwasxw. I am also the President and CEO of First Nations Bank of Canada, or FNBC. We are the only Schedule 1 Indigenous-owned bank in Canada. We are about 90% Indigenous owned. Currently, about 65% of our staff is Indigenous and over half of our board and senior management are Indigenous. We have 19 locations across the country and over $700 million in loans to Indigenous communities and Indigenous individuals. We are very much a reflection of the Indigenous communities we serve, and, like them, we are poised to grow significantly over the next several years.
I believe we are on the cusp of an economic transformation of Indigenous nations. This shift has the potential to dramatically improve the overall well-being of Indigenous communities across Canada. However, to get to where we need to go, we need strong economic leadership, both in the community and from outside.
If we look back at history, even just 30 years ago when the bank started, we had dire poverty in most Indigenous communities, and most of them were fully dependent on the federal government. There was limited public support and limited political recognition that Indigenous nations had rights to their lands and resources. Only a handful of First Nations and Indigenous communities had successful economic development efforts at that time.
So what’s changed? Now, 30 years later, the picture for Indigenous communities is much brighter and economic development is in a whole new category. Now 48% of Indigenous communities have some kind of economic development revenue. On top of that, any significant development that happens in Canada now is likely to have Indigenous participation. Gone are the days when governments and corporations could easily run roughshod over an Indigenous nation. We are now often in a position to become equity stakeholders in new projects.
I want to talk to you today about two innovative partnerships that allow us to bring capital to Indigenous communities.
The first is our $100-million participation agreement with the Canada Infrastructure Bank. We call this the Indigenous Land Development Loan Program. This helps Indigenous communities access affordable financing for infrastructure and land development projects that, in many cases, have been sitting on their desks for years gathering dust. We’re talking about warehouses, hotels, housing developments and economic hubs becoming realities on the ground — not in the next decade but now. We have already seen this accelerate projects from coast to coast to coast.
The second is our $100-million initiative with the Business Development Bank of Canada. This one is close to my heart because it empowers Indigenous communities and economic development corporations to acquire established, operating businesses with management, employees, customers and revenue already in place. This helps retain wealth, expertise and jobs within communities, rather than watching them walk out the door. Together with FNBC’s capital, that is at least $200 million in project funding flowing into Indigenous communities every year. That is real money doing real work.
One of the biggest issues that we have right now — which I will allude to so we have time to talk about other issues — is that we don’t have enough Indigenous financial, investment and corporate professionals to meet our growing wealth and opportunity set. We are doing our best as FNBC to bring young people into the banking industry and to hire laterally into the industry. We believe it is critically important that we build up the expertise and the capacity of our communities to manage these businesses.
Our job is to help Indigenous communities as they build and buy small- and medium-sized businesses. This is nation building at its core and something we take very seriously.
Thank you.
The Chair: Thank you both for your opening remarks.
Senator Varone: Welcome, both of you. My question is for you, Ms. Sandhu.
I have read that you have spent a lot of time creating legislative, creative and regulatory harmony across Canada’s provincially regulated credit unions and federally regulated banks. The question I have — I was trying to see if you’d answered it in your opening remarks — is this: Does the structure of credit unions as cooperatives allow those institutions to take on a greater or lesser risk profile compared to traditional banks? If so, will the alignment of provincially regulated credit unions toward federally regulated banks shift this paradigm, and will it make lending better or worse for SMEs?
Ms. Sandhu: Thank you for your question. There definitely is alignment between how provincial credit unions and federally regulated banks are regulated. Of course, there is the big caveat where provincial regulation is done with a cooperative structure in mind. Provincial regulation is very much tailored to the business model and the size and complexity of what a credit union is; whereas at the federal level — when we look at our federal credit unions — it is more of a standardized, one-size-fits-all approach, which puts them at a disadvantage with respect to their ability to raise capital.
There definitely is alignment. Again, they’re all Basel aligned, which allows them to grow and serve their SMEs that much better. But there are barriers to that growth when we look at our provincial credit unions. Again, they are restricted to their province, so there are limitations that way when we compare them to the largest banks.
Senator Martin: I will start with the first question to Ms. Sandhu. This is related to interprovincial trade, which has become an increasingly important issue given the current economic context and Canada’s efforts to strengthen internal markets.
For SMEs, could you elaborate on the main challenges credit unions encounter when supporting SMEs that expand into other provinces? In particular, how do varying provincial regulations, membership restrictions or licensing rules affect your ability to finance and accompany those businesses as they grow across Canada?
Ms. Sandhu: Thank you for your question. There definitely is a barrier. Of course, if an SME of one credit union moves into another province, there are a lot of barriers for that credit union to serve that SME.
As I mentioned, provincially regulated credit unions can’t follow their SME members into other provinces, which restricts their ability to service their members. There are a lot of conversations going on right now on credit union growth. Federal continuance is one, but extra-provinciality is another. If we look at it from a legislative perspective, all provincial credit union acts currently allow their credit unions to operate outside of their province.
When we look at the flip side of that, B.C. and New Brunswick are the only provinces with credit union acts that contemplate what is involved when a credit outside of the province comes in. However, that is where the progress on that stops. There is a lot at the regulatory level and the supervisory level that needs to be determined. There is deposit insurance; that’s a big one.
Discussions are ongoing between provinces and regulators on how to reconcile that, especially if you have provinces with differing deposit insurance and consumer protection laws. That is another one that differs at the provincial level. So there are conversations going on among various provinces as one way to remove those barriers so that credit unions can follow their SMEs.
Essentially, what we are looking at right now is reciprocal agreements between two provinces to allow that. Again, there are discussions ongoing, but there is a lot legislatively and regulatorily on the prudential supervision side that does need to be done, but it is something that we are actively looking into.
Senator Martin: Maybe on second round, you can expand on that, but thank you for that.
Senator Fridhandler: Mr. Lomax, I have a couple questions. One is simpler, and that is whether you are capital constrained and whether you anticipate that if you raise further equity, you would not dilute First Nations’ interest, but that there is ample capital to be infused into the bank for your book of business as it develops.
Second, on your supportive acquisition of established businesses, is that confined to First Nations, whether it is the acquirer or the target, or are you open broadly on both ends?
Mr. Lomax: Thank you, Senator Fridhandler. We have a bit of an embarrassment of riches on the capital side of things, I’m happy to say.
We have been working on raising $30 to $50 million. We have demand greatly in excess of that coming from Indigenous communities across the country. We are likely to finish up here in the next couple months with our capital raise exceeding the top end of our target.
In terms of the acquisition of established businesses, this is something that I think is a great opportunity for Indigenous communities. I guess it is really more of a one-way street, to answer your question.
We have not contemplated financing non-Indigenous entities purchasing Indigenous businesses. We have been focused the other way, where an Indigenous community is looking to buy an Indigenous business. An example would be a construction company that is servicing a major project; that would be the kind of thing that would be right down the fairway for us — or perhaps a hotel and other businesses.
So our focus is bringing that capital out to Indigenous communities. That is what this program and our partnership with BDC focus on.
Senator Fridhandler: This is for Ms. Sandhu. Could you submit to us the barriers that exist for your credit unions in federal programs, whether it is grants or loans, so that we can focus on whether we want to advocate for any of those things? That is something to follow up on in writing. It would be helpful.
Ms. Sandhu: Sure.
Senator McBean: This question is to both of you.
When we’re talking about SMEs having access to capital and credit, we are often talking about managing risk. In the previous testimony, we heard from Desjardins that one of the ways they are innovating and looking at managing this is through loan sharing and cooperation with BDC and other Crown corporations.
What trends and innovations are you seeing in the small- and medium-sized enterprises — and maybe, if you want to, separate the small and medium ones — in their borrowing needs? What are you seeing that is allowing you to let these businesses start and then grow?
Ms. Sandhu: Our credit unions would probably be the best ones to answer that question in terms of what the trends are with SMEs. If we look at whether you are in a rural area, what part of the country you are in, those trends would probably change a bit.
However, in terms of partnerships that are ongoing to ensure those SMEs are well served, I mentioned Crown corporations. There’s a lot that credit unions are doing to partner with them, whether it is BDC, EDC — FCC is another good example.
For example, many credit unions have MOUs with FCC where it involves information sharing — a referral business, for example, where if one can better serve the SME than the other, then there is a referral that way.
There is also a national liaison committee between the FCC and credit unions, and that includes credit unions that have an MOU and also that do not have an MOU with FCC to better serve those SMEs that are in that area.
Senator McBean: Mr. Lomax, it sounds like you are working with and talking about hotels and larger projects. But are you also helping with smaller businesses and start-ups? What is your reach to smaller businesses, and how are you bridging the gaps in supporting the small- — particularly — and medium-sized enterprises?
Mr. Lomax: Our focus tends to be on working with Indigenous communities rather than individuals. The National Aboriginal Capital Corporations Association, or NACCA, and their Indigenous financial institutions, or IFIs, tend to do more work with the individuals. We partner with them on some of those things, but mostly we allow them to follow that.
You asked about loan sharing and the partnerships that we are seeing out there in small- and medium-sized business trends. One of the things we have been speaking a lot about is this idea that Indigenous communities are really great options for folks who are looking to exit their family business, whether it is fisheries related, construction related and so on.
With the program we have with BDC, what is so innovative about it is they are guaranteeing a portion of the loan, a fairly substantial portion of the loan in some cases, so that we can do up to 100% financing of these businesses. The business still has to be cash flowing and still has to make sense financially for us to get to that 100%. But that can be really great for the community if they have the wherewithal to be able to borrow and not have to put in, say, in a $10-million business acquisition, $2 million, $3 million or $4 million of capital; they can use that capital for other needs for the community.
So when we look at Canada Infrastructure Bank, we look at BDC or EDC. Some of the competitors out there see them as competition. We see them as an opportunity to work together to multiply our capital and bring, again, more innovative ways of getting capital out to the communities.
Senator Loffreda: I thank both Mr. Lomax and Ms. Sandhu for being here today.
My question is for Ms. Sandhu.
We have observed, particularly in Western Canada, a continued trend toward consolidation within the credit union sector.
As institutions seek to achieve greater scale, invest in technology and remain competitive in a rapidly evolving financial services landscape, how does consolidation in the credit union sector allow them to be more effective, particularly in supporting small- and medium-sized enterprises through improved access to capital, enhanced services and greater competitiveness with larger financial institutions?
If I can add to that, as consolidation does progress, what safeguards or policy considerations should be in place to ensure that increased scale does not come at the expense of local decision making and access to financing for SMEs, particularly in underserved or rural regions? Small- and medium-sized enterprises in those regions are extremely important to our economy.
Ms. Sandhu: Yes. There is definitely a lot of consolidation going on in Western Canada, as well as across the country. In 2005, we had around 500 credit unions. Today, we are down to under 200. There is a lot of consolidation.
Contrary to what consolidation might mean in other sectors, where it actually reduces competition, with credit unions, it actually increases it.
As I mentioned, credit unions individually are small, but, together, they do achieve scale and can better compete with the larger banks. They have that much more money to invest in technology that they can then offer to their members.
Consumer-driven banking is one good area that, for SMEs, would come to a benefit. If a credit union were to opt into the consumer-driven banking framework, those SMEs that might have thinner credit histories, because they are newcomers to Canada or might rely on informal systems and whatnot, the credit union having that fulsome, holistic picture of what their data is with other financial institutions then would allow that credit union to that much better serve that SME.
In terms of policy considerations, the big one that we always say is proportionality. I mentioned earlier that a one-size-fits-all approach, a standardized approach, is not always the best. Tailoring regulations to the size, risk profile and business model of a credit union will allow them not to have an undue regulatory burden where there is a cost aspect. Resources will go more toward a standardized approach as opposed to servicing their members and their SMEs.
Senator Yussuff: Thank you both for being here. Mr. Lomax, I want to start with you with regard to the role of the First Nations bank. In the context of raising capital to set up the bank and grow your footprint across the country, where would you say that your long-term horizon is right now? What success have you had in growing access to capital that you can then, of course, start to use to broaden your footprint in many of the First Nations communities across the country?
Mr. Lomax: Thank you, senator. We have been quite successful in raising capital. As I mentioned earlier, we are actually having to limit the amount of capital that we’re bringing in, primarily because if we bring too much equity capital into the bank, it puts pressure on returns on equity, or ROE.
We aren’t necessarily seeing a lack of capital for us at this stage, but what we are doing is finding ways to multiply our ability to bring capital out to Indigenous communities. That is where the partnerships with the Crown banks are so important, for example, with Canada Infrastructure Bank, Export Development Canada and the Business Development Bank of Canada. We don’t have anything with Farm Credit Canada yet, but we may at some point. We have some kinds of partnerships going on with those three.
We look at that as a really important way to serve communities in ways we are not seeing from other financial institutions.
In terms of growth, we serve communities coast to coast to coast, and we are looking to continue to expand. While the bank was originally formed in Saskatchewan, we have business pretty much across the country. Currently, our fastest-growing regions are British Columbia, Alberta and Ontario.
I hope that answers your question, senator.
Senator Yussuff: I have a follow-up question in regard to your growth model. Has the bank been facing any strain with regard to your lending capabilities and businesses, both successes or failures?
Mr. Lomax: We’ve been very successful in our lending. Whenever there is an interesting and good opportunity, we see a fair amount of competition from the other banks. We’ve been fortunate to never have a significant commercial loan loss in the history of the bank.
While we think that is partly due to us being good lenders, we also have to tell you that a big portion of that is that Indigenous communities pay their bills, even when they don’t have to at times. They want to keep relationships going with the financial services community, so they have been great partners for us. We would like to continue to expand. We’re very much in an expansionary moment in our history. Our commercial lending expanded by 26% net last year, and we’re expecting continued double-digit growth over the next several years.
Part of this is really that we are a reflection of the communities we serve. We’re seeing so much success with communities right now that provides a lot of opportunity for us as an institution.
Senator C. Deacon: Thank you for being with us, Ms. Sandhu and Mr. Lomax. That was quite a statement you made, Mr. Lomax. It was impressive to hear.
We were recently part of studying open banking, and I have been a big supporter of it, and the tools that financial technology companies are developing that allow alternative data to be looked at and to analyze risk differently. I think they have a lot of power.
You both represent community-centric financial institutions, which are very different from our big banks. That is a really good thing, in my opinion.
I want to have a sense of how those financial technologies may be helping you in identifying loans that, perhaps, wouldn’t have qualified in the past, as well as how they might be helping you to expand your business. Maybe we will start with you, Mr. Lomax, then move to Ms. Sandhu.
Mr. Lomax: Thank you. When we look at financial technology, we are very heavily dependent on outside vendors for our entire banking platform because we’re a relatively small bank. We don’t have the capability to build in-house.
I will echo Ms. Sandhu’s frustration around the one-size-fits-all approach that we see from the regulators. We have had to increase our regulatory staff dramatically in order to meet the increasing burden that is coming. In terms of financial technology, I think it is an exciting opportunity for us to dig in, but for the Indigenous communities that we serve, this is still very much a face-to-face business.
While we’re looking at new technologies to try to make our people more efficient, all of the Zoom meetings in the world do not equal showing up in the community and spending time with leadership and community members. There’s still a fair amount of analog for us that is important for developing businesses.
Senator C. Deacon: Thank you, Mr. Lomax.
Ms. Sandhu: I hinted at it earlier, but the average Canadian and the average SME bank with multiple lenders. It is very rare that you have an individual or SME that is solely tied to one financial institution. There is definitely a blind spot for a credit union when it comes to looking at their financials and the loans and other things that they can offer. With open banking, that blind spot is essentially removed and they can tailor their advice that much better to their SMEs, then offer them whatever financing it might be.
The Real-Time Rail is a good example of a lot of financial sector modernization efforts that seem to now be coming closer to fruition. Senator Deacon, you and I have had a lot of conversations in the past on a lot of these efforts dragging out and taking a long time to develop. It is great that we now seem to be closer to that implementation road, but we really do see consumer-driven banking as one way to really hone in on a credit union’s ability to service their members.
As I mentioned, credit unions are known for the relationships they have with their SMEs and their members, and this will further solidify that as well and, again, increase the competition for financial services and strengthen that middle tier that credit unions belong to.
Senator Wallin: Just a couple of points of clarification — Ms. Sandhu, I think you said in your opening remarks that Crown corporations shouldn’t unfairly compete with credit unions, but you’re also talking about the MOUs that you have. What is an example of an unfair competition situation?
Ms. Sandhu: Thank you for the question, and I’m glad you brought that up. With credit unions and, for example, the FCC, they are both competitors as well as collaborative partners, so when I say collaborative partners, it is through the MOUs and the national liaison committee. When I say “direct competitor,” it seems as if the Crown corporations — because they have strong credit ratings and lower borrowing costs and had a lot of access to funding over COVID-19 and early last year with the tariffs — did receive a lot of injections of funding.
In many ways, the interest rates, for example, that they can offer are simply not competitive for some credit unions.
It’s in those ways where we definitely see Crown corporations as complementing the credit union sector and other financial institutions and not beating them out on those prices.
Senator Wallin: Mr. Lomax, when you talk about equity partnerships with the Infrastructure Bank or the development bank, are you talking about with you or through you to the client? It sounds like they are also funding you, in a sense.
Mr. Lomax: We are a for-profit company, and we have never taken any funding directly to the bank from a federal entity. We are fully on our own.
What we do with the banks is very common, such as syndication partnerships in the case of the Canada Infrastructure Bank. When we are looking at an opportunity, essentially what we have set up is a situation where we can negotiate a deal with a community that is more attractive because they have a lower cost of capital alongside our capital. Their capital might be 25% of the overall cost of the loan. Ours will be the 75% cost of the loan, but we work as syndicate partners.
Senator Wallin: Your loans? You’re lending?
Mr. Lomax: We are lending. Money is coming out of our pocket, and then the Canada Infrastructure Bank will fund their portion of the loan.
With BDC, it is a bit different, at least currently. They are acting more as a loan guarantor for loans that we do.
[Translation]
Senator Henkel: My first question is for Ms. Sandu.
Thank you for being here. Your 2025 advocacy plan sets out five priorities for the credit union sector: growth, stability, modernization, financial crime, and community impact and sustainability. I didn’t see SMEs listed as a priority anywhere.
Should we take that to mean that access to capital for small entrepreneurs is something you take for granted, or do the challenges around modernization and stability put support for SMEs on the back burner?
[English]
Ms. Sandhu: Thank you for your question.
It is definitely not something that we take for granted. As I mentioned, SMEs make up a large portfolio of credit unions. Again, given many barriers to credit union growth, those barriers limit the amount of capital that a credit union has that they can then offer to their SMEs.
It’s great that, as you mentioned, a lot of what this government, as well as OSFI, has been doing is looking at reducing those barriers, increasing competition and strengthening Canada’s middle-tier financial institutions. We are following those very closely and believe that the ability of a credit union to grow overall does allow them to better service their SMEs. As cooperatives, the profits are essentially for the people. They go back into the communities and to their members as well, including SMEs.
We are looking very diligently into what this government is doing and what OSFI is doing, with a keen eye on working with them to ensure that we can pull out the utility we can maximize to the benefit of SMEs.
[Translation]
Senator Henkel: Mr. Lomax, thank you for being here and congratulations on your bank’s fine initiative.
I asked around, checking with Indigenous entrepreneurs I know, and not everyone seems to be familiar with your institution. By the same token, those who are familiar with you don’t really know the services you provide. As I understand it, you focus more on lending to organizations that in turn lend to small businesses.
Here’s my question: Do you have a system for tracking or a reporting mechanism to make sure that Indigenous women, especially those in regions who need loans, are truly served?
[English]
Mr. Lomax: Thank you, Senator Henkel.
To clear a couple things up, we don’t loan to other organizations that loan to individuals. Our primary focus is on Indigenous communities. When we do lend to individuals — which is, again, limited — most of it comes from other Indigenous financial institutions related to the National Aboriginal Capital Corporations Association, or NACCA. We don’t have a program for Indigenous women, but this is probably because we don’t have a program for individual entrepreneurs.
However, if you look at the organization in the community broadly, Indigenous women have always been a big part of the fabric of leadership. In our bank, 60% to 65% of our employees are female. A large portion of our board is female, as well as our senior leadership in management. I think you can compare us and the number of women who work for us at all levels to any other financial institution in Canada, and I would be happy to see that comparison because I think we probably have a stronger focus than any other bank in the country.
In terms of how well we’re known across the country, frankly, that has been a big part of my job. I have been here for about three years. When I arrived here, I would hear that we were the best-kept secret. They would ask us how long we’ve been around, and that’s a terrible place for a bank to be.
I’ve spent the past three years focusing on marketing, getting the name known and out to the communities and getting earned media. If you take a look, you will see that, in the past 3 years, we have had more earned media than we did in the past 26 years combined. We’ve probably had more conferences where the CEO has been speaking than maybe in those years combined. I felt as if I were doing one every other week for the first couple of years.
I appreciate that not everybody knows us, but it is something that we’re actively working on. Thank you.
The Chair: Thank you, Ms. Sandhu and Mr. Lomax, for your time and contribution to this study. It will be taken into consideration by the committee.
Colleagues, on your behalf, I want to thank our interpreters, analysts and all the Senate staff who assist in our work. Our next meeting is tomorrow at 10:30 a.m.
(The committee adjourned.)