The Honourable Rechie Valdez, Minister of Small Business, recently tabled a report related to the review of the Business Development Bank of Canada Act. As stated in the report, the Business Development Bank of Canada (BDC) is a financial Crown corporation wholly owned by the Government of Canada that provides support to small and medium-sized enterprises (SMEs) and entrepreneurs.” In addition, “[t]he BDC is required to operate as a complementary player in the market, offering financing, capital, and advisory services for Canadian entrepreneurs that fill out or complete offerings available from private sector providers.” 

The report is the result of the BDC Legislative Review which took the form of roundtable consultations, meetings, and submissions over a period of one year. The goal of this review is to evaluate BDC’s performance relative to its mandate and how it might evolve going forward to best support Canadian businesses. CMC was one of 210 non-governmental stakeholders that participated in roundtable consultations. It should also be noted that other sector stakeholders, such as the Conseil québécois de la coopération et de la mutualité (CQCM), Desjardins Group, Uni Coopération financière, Canadian Credit Union Association, Alberta Central, Libro Credit Union and Vancity also participated, and CMC thanks them for sharing their insight and expertise.  

Although the positive impact of the BDC was well documented, many gaps and barriers were also identified. For example, as of 2022, the BDC had assets of $47.8 billion committed to 95,000 SMEs, but only 54 co-ops were part of its client portfolio, and this number has remained consistently low through the years. Moreover, the report has an entire section which emphasizes that co-operatives (as well as social enterprises) are underserved, and that additional focus is needed to support them. This section also recognized that co-operatives, along with social enterprises, “operate within unique contexts that require a clear understanding of their business models by lenders, as well as eligibility criteria that explicitly express support for and target this subset of businesses.” Similarly, the report also recognized that “rural SMEs are more likely to borrow from other types of lenders, such as credit unions or caisses populaires,” highlighting their importance as financial partners.

Furthermore, BDC’s increasing support of co-operatives can also help address other performance gaps, such as reaching underserved market segments such as rural communities, newcomers, women and indigenous entrepreneurs. With this in mind, the report did showcase the 2021 agreement between the BDC and Alterna Savings and Credit Union, which extended joint loans to these underserved groups and communities as an example of a partnership. 

To move forward, the report has four main recommendations, notably:

1. Strengthen accessibility and visibility: The BDC should increase the impact of its support for equity-deserving groups and underserved market segments such as newcomers, Indigenous entrepreneurs, and rural communities. The BDC should also enhance its offerings by expanding and clarifying eligibility requirements and streamlining loan applications and other processes. 

2. Improve reach across Canada: Recognizing that its activities are largely concentrated in the Quebec and Ontario regions, the BDC should strengthen its presence and engagement across Canada, particularly in the Prairie and Atlantic regions, through expanded partnerships and awareness-building initiatives to better support SMEs, including those in rural communities. 

3. Reinforce collaboration and complementarity: The BDC should further improve its partnerships with stakeholders, including regional players. Furthermore, enhanced cooperation with partners across the SME ecosystem is needed to ensure complementarity with private sector financial institutions, address market gaps for underserved market segments, and bolster alignment across Government of Canada initiatives. 

4. Increase data cooperation and refine risk appetite: To continue to improve collaboration, transparency and accountability, the BDC should enhance its reporting and data-sharing practices with stakeholders and its shareholder. This should include the improvement of existing data collection and disclosure practices, in addition to the establishment of information-sharing arrangements with ecosystem partners. Further, the BDC should review its risk appetite to better support equity-deserving groups, underserved regions and sectors, and newer businesses. 

Small businesses are not small—they make up 98% of all Canadian businesses, and supporting them is a top priority for our government. As Canada’s only bank focused on SMEs, BDC has played a critical role in supporting entrepreneurs navigating the challenges of the last few years. The recommendations in the legislative review report will enable BDC to improve services to underrepresented entrepreneurs and regions and ensure that SMEs from coast to coast to coast can start up and scale up.” 
The Honourable Rechie Valdez, Minister of Small Business. 

In conclusion, although technically the BDC can support co-operatives, the fact is that they have only seen a 35% growth since 2017. This translates to the above-mentioned 54 co-operative clients and confirms the need for the BDC to change its practices and approach. On the other hand, the non-traditional business models section featured co-operatives prominently. This addition was very welcomed, especially since the 2010 review did not have a single mention of co-operatives, credit unions or caisses. CMC is quite pleased that its message was heard, and it will be engaging with the BDC to help implement the reports’ recommendations.

The 20102022 Business Development Bank of Canada Legislative Review Report is accessible online at the Legislative Review website.