A PRESENTATION TO THE MNC ECONOMIC DEVELOPMENT CONFERENCE
Economic Development Strategy subsequent to Budget 2016
Background • Economic self-sufficiency for Métis citizens, Métis communities and the Métis Nation—as a whole— within Ontario is a goal set out in the MNO Statement of Prime Purpose • Initial attempts by the MNO to pursue economic development proved unsuccessful • This experience led to the development of a principle based economic development strategy that saw MNO design a model based on ‘best practices’ and obtaining policy, legal and tax advice
Principles • Efforts are institution based – promotion of citizens’ self-sufficiency is the primary focus of MVDF – promotion of collective self-sufficiency is the primary focus of Infinity Investments • Institutions have operational independence – Separation of business decisions and political decisions – Appointment of directors on a qualifications basis • Implementation appears, thus far, to have been successful – Infinity is profitable and with an asset base exceeding $ 80M – MVDF is the largest Aboriginal Financial Institution in Ontario and the fastest growing in Canada with arrears and bad debt substantially below AFI norms
Institutions in the MNO framework • While operational decisions are made independently the opportunities facing Infinity Investments and the opportunity to create and support MVDF arise from the MNO • Through government policies or duty to consult related engagements, there are unique business opportunities only available to Métis communities and the MNO; this is the class of opportunity that Infinity Investments seeks to capitalise upon for the collective Métis benefit • Correspondingly the opportunity to secure capitalisation for MVDF to invest in Métis businesses also derives from the government policies or duty to consult related engagements • MEDS is a prime example
MEDS considerations • Worth noting that no First Nations, Inuit, or pan- Aboriginal approach for capital was successful • The source for capital requirements for MVDF and Infinity are different • For MVDF – Developmental lending economics preclude capital growth – Volatility can impair the capital base, which leads to a negative cycle – If lending limits are to raise with inflation then, given concentration risks, the capital base must rise – Demand for capital in the resource sector alone has proved sufficient to fully engage MVDF’s capital
MEDS considerations • For Infinity – Without capitalization, where Infinity captures an opportunity it must borrow equity – This either limits the return or precludes investment – Where a guarantee is sought form the governing body to satisfy collateral requirements a poor investment can significantly impair the financial health of the governing body – MNO made the explicit and difficult decision to defer dividend payments to build Infinity’s balance sheet – This also serves in the start-up period to promote success where dividend payments will almost certainly not cover operating expenses
MEDS proposal • MNO asked the institutions to balance their needs and to come to a joint recommendation for the MEDS funding and to jointly develop a proposal • An equal split has been proposed • Initial 50% to Infinity – Operating funding on a declining basis – Majority of funding to capitalization – Rationalize capital structure and permit further larger scale ventures • Final 50% to MVDF – Successful in resource sector, however, capital is insufficient to meet general demand – New product development, e.g. capital leases and hybrid debt/equity products
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