This chapter provides key findings of the Summative Evaluation of the Aboriginal Business Development Program of Aboriginal Business Canada. The Aboriginal Business Development Program (ABDP) is made up of three components:

Aboriginal Business Development – a program to provide financial support (contributions) to existing and potential Aboriginal businesses to encourage viability and self-reliance.

Aboriginal Capital Corporations (ACC) – a program of support to ACCs to establish, expand or diversify their operations.

Access to Capital (ATC) – offers support and services to strengthen Aboriginal Financial Institutions (AFIs) ⁽¹⁾, including the Support and Training (ST) initiative, and fosters increased availability and affordability of capital for developmental lending.

¹ AFIs include ACCs, captialized through a predecessor program to ABDP, and Aboriginal Community Futures Development Corporations (ACFDCs) begun by other departments and regional development organizations such as WED and FedNor.

Evidence has been collected from a number of secondary sources and through interviews with 54 key informants (representatives of partner organizations, departments, Aboriginal Financial Institutions and delivery organizations) and 13 staff of ABC.

The chapter concludes with recommendations based on these findings.

A. Impact on Aboriginal Businesses and Entrepreneurs

In surveys of supported businesses, respondents identified the degree to which they had been affected by ABC support. Based on their comments the authors concluded that approximately 1,800 to 2,200 businesses would not be in business today without the past support. Also between 700 to 800 might not be operating today without the support provided to them by the ABD component. Further about one-half of the businesses assisted through ABD were then able to lever additional support from other financial sources. This indirect effect may further improve the viability of their operation. Staff and key informants provide further evidence that ABDP has increased the number of viable Aboriginal Businesses.

Key informants believe the ABDP leads to new business opportunities for Aboriginal businesses and entrepreneurs. Staff suggest that ABC does not create opportunities but instead facilitates the achievement of opportunities.

Secondary sources suggest approximately 35,000 jobs of varying lengths and degrees (full-time, part-time) have been created through the ABDP. Not all of these jobs may remain. Although virtually all key informants suggest a job impact has occurred, staff suggest that creating viable firms and not creating jobs is the focus of ABC programming.

Over 90% of non-staff believe ABDP contributes to a supportive business environment, increased self-reliance and improved levels of business success. All staff believe success for Aboriginal businesses has increased. Regression analyses conducted for ABC of a group of ABD clients and similar non-clients supports the view that support has led to success.

Virtually all key informants felt that ABDP has assisted in the development of a sustainable and competitive Aboriginal economy. Further, 80% felt it had increased the national and international recognition of Aboriginal businesses in traditional and new industries.

Over ninety per cent of key informants believe access to capital has increased through the ATC and ACC components. Reports by NACCA suggest $18 million in actual or planned loans result through one component of ATC-Interest Rate Buy-down (IRB). The ACC network has provided more than $550 million in loans through its initial funding of $168 million. Loans resulting from the ACC and ATC component are expected to have assisted in the establishment of approximately 13,600 Aboriginal businesses.

A number of key informants and staff voiced concern that current strategic priority criteria are too restrictive. They may limit the number of potential worthwhile projects available for current and future support. (Note this was also a finding of the formative evaluation. ABC staff is engaged in a process to improve the reach through its criteria within its current resource allocation.)

B. Impacts on Aboriginal Financial Institutions and Business Development Organizations

More than two-thirds of key informants believe that ABCs programming has developed institutional capacity among tourism, marketing and general business organizations. A majority assess the enhanced capacity impact as at least large.

No single factor was identified as being key to the success of Aboriginal Financial Institutions. However, ABC was credited with much of their expansion and diversification. Eighty-seven per cent of AFIs have used Support and Training projects to further enhance the capacity of their institution. In addition, 88% of key informants feel that ABCs programming has strengthened the institutional capacity of ACCs, ACFDCs and NACCA (National Aboriginal Capital Corporation Association).

Key informants see ACCs as being different than the mainstream financial sector. They are smaller in terms of their loan portfolios, with fewer assets in terms and cash. Their clients are distant, more likely to be in remote locations and slightly less credit worthy. ACCs have relatively higher costs and slightly higher net interest on their loan rate. They have a greater percentage of total revenue derived from loan interest and the per cent of their portfolio in developmental loans is more than for a bank. All key informants suggest ACCs fill a gap in the products or services offered to Aboriginal business by the mainstream financial sector.

About three-quarters of key informants felt ABC programs have led to an expansion of geographic coverage, Aboriginal client coverage, and developmental capital and loan levels.

A concern was expressed by a small number of staff that ACCs may be becoming more risk averse possibly resulting in some needs for developmental support remaining unmet. Reasons for increased risk aversion by ACCs may be:

Initial under-capitalization.

Capitalization diminished through loan losses and costs above net loan revenue.

Profit margins squeezed by historic low interest rates.

Greater competition for loan business forcing ACCs to lower margins on their loan rates.

C. Recommendations

This study found ABC had a positive impact on Aboriginal businesses and entrepreneurs and Aboriginal Financial Institutions. However, there is some evidence to suggest that the current strategic priority criteria may unduly constrain future impacts within some geographic and criterion-specific areas (youth, tourism).

ABC should expand its strategic priorities to address valid needs by Aboriginal businesses and entrepreneurs that fall outside current criteria. ABC should review program budgets in light of any expansion in its strategic priorities to ensure resources are in line with expected demand.

ACCs were set up under a predecessor program to ABDP and can be based on industry, ethnic group, geography or some combination of elements. Duplication can exist across the service area or client base of ACCs. ACFDCs were set up by regional organizations or departments and many share similar geography and client bases with ACCs. There may be opportunity for gains through greater rationalization or co-operation among AFIs. Possibilities may include co-operative arrangements related to serving distant clients, joint marketing activities, or merging to achieve greater efficiencies.

ABC should encouraged AFIs to explore opportunities for greater efficiency.

There is limited evidence but compelling reasons for ACCs becoming more risk averse (under-capitalization, reduced capitalization, and lower margins as a result of historical low interest rates and increased competition).

ABC should continue to support AFIs to enhance their institutional capacity and facilitate their access to additional capital for developmental loans.

There is limited evidence to suggest that ABD and the ACC and ATC components serve different client groups. On the one hand this might indicate a co-ordinated design satisfying different market segments. On the other hand it might indicate that efficiencies for the client and program are being missed. For example both client and ABD and ACC staff might benefit from a single application involving both an equity and loan request. This would result in only one proposal and one assessment before a joint agreement that support should or should not be provided.

ABC should investigate the degree of client overlap across components of the ABDP. If low, ABC should determine if this is a good thing reflecting different client needs or a bad thing suggesting missed opportunities for greater efficiencies through co-ordination.

We understand that ABC management is already pursuing some of these recommendations.

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