Limited cash flow could stall Nunavut credit union

GREG YOUNGER-LEWIS

Nunavut Tunngavik Inc. risks wasting money on creating a stand-alone bank for the territory if they try to start one too soon, according to their advisors.

Banking consultants have told NTI that it has to take “baby-steps” towards setting up a made-in-Nunavut bank, partially because the territory lacks the deposit base that most financial institutions need to get started.

Robert Trudeau, head of RT Associates Ltd. from Thunder Bay, said NTI’s main aim should be getting more banking options to the smaller communities, where he found access to financial services is “average to poor.”

But he said NTI can help people gain access to banking without the major investment required to create a brand new bank for Nunavut.

“It’s a challenge to start something new,” Trudeau said in an interview last week. “I think the idea here would be to solve what we can in the short term, and do things immediately that are cost-effective, that make real differences in people’s lives.

“We don’t want to set up a new institution, lose money for four to six years, and then give up.”

Trudeau’s company has been researching banking in the territory on behalf of Atuqtuarvik Corp., a small-loans agency of NTI.

Next week, Trudeau will present his findings to Inuit leaders at the NTI annual general meeting in Rankin Inlet.

Most recommendations in the yet-unreleased report suggest NTI should team up with an already-existing bank, like Quebec’s Desjardins credit union, or Saskatchewan’s First Nations Bank. They would tap into a network capable of running some banking services on the side, like Arctic Co-operatives Ltd., which runs the co-ops in Nunavut.

The southern partner would be called an “agency bank,” where they don’t set up a full-fledged branch in a community, but offer some services from an office in the Northern store, co-op, or another store. A trained professional would take deposits, process bills, and help clients access cash a few hours every day.

For small business loans, the report suggests creating a program for loans under $100,000, through regional groups like the Baffin Business Development Corp., that would borrow capital from Atuqtuarvik’s pool of money.

Trudeau said many residents in smaller communities told him that they wanted better access to personal loans and lines of credit.

In his company’s report, Trudeau wrote that Atuqtuarvik would be able to create a new department to handle personal loans.

Trudeau stressed that these recommendations would be short-term solutions to Nunavut’s banking needs.

He said, after these financial services became more available, Nunavut could look at the long-term solution of creating its own bank.

The advantages of having a Nunavut bank would be huge, Trudeau said, because it could make major investments elsewhere, and bring the profits back to the territory.

For now, consultants estimate that Nunavut residents and businesses only have up to $300 million that they could be depositing in banks at one time. This amount falls far short of the $1 billion that a bank usually needs in its market in order to run profitably.

Besides the limited cash flow, the pending report finds that the newness of banking in Nunavut is also an obstacle.

Trudeau’s study concluded that educating Nunavummiut about financial services should be one of the first steps that NTI takes in trying to improve residents’ and businesses’ banking issues. This might involve having an Inuktitut radio show every week, talking about money management, such as taking out a loan, or servicing a mortgage.

The study draws on questionnaires completed by 30 Nunavut businesses, plus interviews and focus group in six communities, including Pond Inlet, Panniqtuuq, Kugluktuk, Arviat, Cape Dorset and Iqaluit.

Trudeau admitted the study is short on concrete costs of the various proposed options, but hoped the NTI delegates would vote to continue research on a particular model.