Businesses that can’t easily access credit experience slower growth. Indigenous-owned firms are less likely than other firms in Canada to use conventional lending products—like loans or lines of credit from banks. We look at why Indigenous-owned businesses may face barriers to accessing credit.

Firms rely on credit and equity to fund expansions or finance their operations during periods of weak sales. Most Canadian businesses borrow from conventional financial institutions such as banks and credit unions.

But Indigenous-owned firms are much less likely to use those sources of financing.

We know this from a survey we conducted with the Canadian Council for Indigenous Business and Global Affairs Canada. In all, about 2,600 Indigenous-owned firms headquartered in Canada answered questions on business conditions. The survey, conducted in 2021, was and still is the largest of its kind.

The survey results are worth revisiting because they’re still relevant today. Our findings, among others, suggest that Indigenous-owned firms may face barriers to accessing financing and that the lack of credit is an obstacle to growth.

Compared with other firms, Indigenous-owned businesses rely less on conventional lenders to finance operations

Insight into how Indigenous-owned firms operate—especially where they obtain their funds—has been limited for many years. The 2021 survey aimed to fill some of this information gap.

The survey covered a range of topics, such as business objectives and general business conditions, as well as firms’ primary sources of financing. Participating firms were majority-owned (at least 51%) by an Indigenous person, community or economic development corporation.

When participants were asked about their primary sources of financing, only 8% reported using credit from conventional financial institutions or equity (Chart 1). For this 8%, the vast majority of that credit or equity is in the form of business loans.