NTI considers alliance with southern aboriginal bank
Partnership would require investment of up to $10 million
Banks created for First Nation reserves have emerged as the number-one solution to Nunavut leaders’ quest to bring banking services to the territory’s far-flung communities.
Aboriginal financial outfits are best suited to establishing a permanent alternative to the mainstream banks based in Nunavut, according to a study released this week.
Nunavut’s smaller communities currently have few options for banking, besides driving a skidoo or flying to one of the territory’s three regional centres.
Nunavut Tunngavik Inc. leaders are now considering investing upwards of $10 million dollars in an alliance with banking agencies that are tailored to the needs of First Nation reserves.
Delegates at NTI’s annual general meeting in November commissioned RT Associates, a consultancy in Thunder Bay, to continue researching the best way to create a new financial institute in Nunavut.
Robert Trudeau, president of RT Associates, said the results show Inuit are better off teaming with aboriginal groups because they will be more sensitive to the needs of Nunavummiut.
“Why did those organizations form in the first place?” Trudeau said in an interview. “It’s because there was a feeling that the big banks are not sensitive to aboriginal needs.”
Inuit leaders were outraged last year when the Bank of Montreal surprised their customers with the closing of their branch in Iqaluit, the only one in Nunavut. Officials with the bank said they had to leave because they weren’t making enough profit.
Trudeau said Inuit will have more control over their financial services, if they pay one of Canada’s aboriginal banking agencies to create a division in Nunavut.
He estimates the partnership would require NTI to invest between $5 and10 million in the group, in the coming years. According to the study, the investment would give Inuit influence over the group’s corporate decisions by having a member sit on their board.
Trudeau warned Inuit leaders should do more research on the potential deal, so they can be confident that they will eventually see a return on the investment.
“When you’re talking big bucks, you want to do things carefully,” Trudeau said.
Trudeau has already approached two aboriginal groups about doing business in Nunavut.
Keith Martell, chair of the First Nations Bank in Saskatchewan, said his agency has been eyeing opportunities in the eastern Arctic since the bank first formed in 1995.
The bank, based in Saskatoon, has $136 million in assets and about 5,000 commercial and personal customers, mainly from aboriginal reserves.
Martell said those communities have seen a boom in resource development projects, such as in timber, and benefited from controlling their own local finances.
He said Nunavummiut need to get directly involved in local banking, if they want to reap the most from resource development, such as mines, in their territory.
“If we don’t have our own vehicles to make sure we’re players in that development, we’re just bystanders,” Martell said. “We have a good time for a short time, while there’s jobs there, but you don’t maintain any long-term sustainability.
“[Financial control over banking] grows an economy that can give people jobs, educate kids and feed families, all those things that keep a community running.”
Warren Hannay, the CEO of Peace Hills Trust in Alberta, said his group is exploring business opportunities in Nunavut.
Peace Hills Trust, based in Hobbema, has $700 million in assets and 20,000 commercial and personal customers, mainly aboriginal development groups, including the Inuvialuit.
Hannay said his staff will already be familiar with banking challenges in Nunavut, through their work with isolated fly-in communities throughout the prairies.
But Hannay said they’re not ready yet to set up the new bank division.
“The road is long,” Hannay said. “Good relationships are not built overnight.
NTI president Paul Kaludjak confirmed that they’re also negotiating possible alliances with other groups, but declined to name them.
Kaludjak said the main stumbling block is financing the project. He expects it will cost nearly $20 million to complete their short-term and long-term goals.
But he said he doesn’t know exactly where the funding will come from.
“That’s something we have to assess,” Kaludjak said. “That’s where we have a great deal of interest in partners.”
In the short-term, NTI is considering setting up banking services for the smaller communities through a pilot project with Arctic Co-operatives Ltd. and the Royal Bank.
The study recommends ACL provide co-op store offices space and staff to the Royal Bank, which would offer training, marketing and financial services.
With the backing of NTI, consultants estimate ACL and Royal Bank could have the services set up within a few months.