Finance Minister Katrine Conroy tables the budget in the legislative assembly at the legislature in Victoria on Feb. 22.CHAD HIPOLITO/The Canadian Press
British Columbia plans to launch an Indigenous loan-guarantee program backstopped by up to $1-billion in government funds, embracing a model already operating in Alberta, Ontario and Saskatchewan.
The First Nations Equity Financing Framework, announced Thursday in the NDP government’s annual budget, would include a special account set up with a $10-million inaugural balance and a cumulative loan guarantee limit of $1-billion, to be reviewed each year.
The program marks a significant policy shift and bodes well for future projects, said Niilo Edwards, chief executive officer of the First Nations Major Projects Coalition (FNMPC), a Vancouver-based group that has lobbied the B.C. and federal governments to provide Indigenous loan guarantees.
“This policy change has broader implications – it says to the private sector that financing First Nations equity partnerships is viable, that it’s another tool to advance economic reconciliation. And it gives capital markets more comfort around how First Nation private-sector deals are structured,” Mr. Edwards said.
B.C.’s new loan-guarantee program, which is subject to legislative approval, follows years of reports that have flagged access to capital as a significant barrier to economic development for Indigenous peoples in Canada. Under the Indian Act, First Nations in most cases are not able to use their land or other assets as collateral. If a conventional lender does agree to lend to a First Nation, interest rates tend to be higher than those offered to other clients.
As a result, First Nations have been sidelined from projects in their territories, including forestry operations, oil and gas development and mines, said Sharleen Gale, chief of Fort Nelson First Nation and FNMPC board chair.
“This is definitely a game-changer. The Indigenous loan guarantees will ensure that First Nations can participate in their economies,” Ms. Gale said.
Calls for Indigenous loan-guarantee programs have grown louder in recent years as provincial and federal governments scramble to reduce greenhouse-gas emissions, develop new critical mineral projects and bolster electricity networks – goals that require billions in new investment and building on, near or through First Nations’ traditional territories.
In a 2023 report, FNMPC listed several projects that feature First Nations ownership, including the Tu Deh-Kah Geothermal Project in B.C., led by Fort Nelson First Nation, and the Chatham to Lakeshore Transmission Project in Ontario, a Hydro One project in which a group of five First Nations has an option to acquire a 50-per-cent stake.
Those and 12 other major projects in which FNMPC members are pursuing equity stakes amount to nearly $55-billion in capital costs, the report said, highlighting the need for loan guarantees.
The B.C. program would be in line with similar models in Ontario, Alberta and Saskatchewan.
The Ontario program, launched in 2009, is the oldest. As of March, 2023, 11 loan guarantees have been approved under the program, totalling about $500-million, according to Ontario’s Ministry of Finance. There have been no defaults.
In its fall economic statement this past November, Ottawa said it would work on developing an Indigenous loan-guarantee program, with details to come in the 2024 federal budget. In budget documents, B.C. said it would work with Ottawa on its plans for a national program and look for ways to “align and harmonize” federal and provincial approaches.
Ms. Gale said she hopes Canadians will see the upside of loan-guarantee programs such as B.C.’s, noting that First Nations have faced “credit card rates” when they have tried to borrow funds to invest.
“Historically, I think this is really a great moment. This isn’t just government money going out the door. This is actually a backstop. So that First Nations can get the financing at a low interest rate and be able to benefit by being meaningfully involved in major projects.”