Financial Support for Indigenous Businesses and Aboriginal Financial Institutions

Introducing the Financial Support for Indigenous Businesses and Aboriginal Financial Institutions (FSIBAFI) to provide up to $40,000, interest-free loan of $30,000 and  non-repayable contribution of $10,000, to First Nations, Inuit, and Métis small and medium-sized businesses, to help them cover their operating costs during a period where their revenues have been temporarily reduced, due to the economic impacts of the COVID-19 virus.

The financial support will be provided through Aboriginal Financial Institutions and administered by the National Aboriginal Capital Corporations Association and the Métis Capital Corporations in partnership with Indigenous Services Canada.

The FSIBAFI eligibility criteria were assumed to match those of the Canadian Emergency Business Account[^1] and the program was presumed to become available in May 2020. The number of eligible businesses was estimated using Statistics Canada data and the 2016 Aboriginal Business Survey. All eligible companies are assumed to participate in the program. The interest rate estimate was based on projections in the PBO economic model, consistent with the Economic and Fiscal Scenario published on June 18, 2020. The default rate on payment was estimated using the historical data on loans in default of the Business Development Bank of Canada. The entire amount of loan was assumed to be granted in 2020-21 and all businesses, except those in default, are assumed to repay their loan on or before December 31, 2022.

The government interest cost was equal to the total amount of the loan times the interest rate. The provision for default was equal to the total amount of the loan times the estimated default rate on payment. The cost of the non-repayable contribution was equal to the estimated number of businesses that will benefit from the program times $10,000. The total cost for the government was the sum of the interest cost, the provision for default and the non-repayable contribution cost.

PBO estimates this program to cost $75 million in 2020-2021. The time horizon for this costing is aligned to PBO’s June 18, 2020 Economic and Fiscal Scenario.

The two greatest sources of uncertainty in this costing are the number of eligible businesses that will apply to the program, and the percentage of participating businesses that will repay their loans on or before December 31, 2022.

• Estimates are presented on an accrual basis as would appear in the budget and public accounts.
• A positive number implies a deterioration in the budgetary balance (lower revenues or higher spending). A negative number implies an improvement in the budgetary balance (higher revenues or lower spending).
• “-“ = PBO does not expect a financial cost