OTTAWA – When he appeared before a Parliament Hill committee last week to talk about rural development, Tony Fuller saw access to affordable credit as a problem.
“The banks are not interested in small loans and small business,” said the professor from the University of Guelph’s school of rural planning and development. “Attitudes have to change.”
Within days, the money lenders came before MPs on the natural resources committee to offer a different view.
David McInnes, government relations director for the Canadian Bankers Association, said chartered banks make billions of dollars available to rural Canada and agriculture.
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He said efforts are ongoing to improve service through toll-free numbers and counselling services.
Michel Poulin, speaking for the Credit Union Central of Canada, noted the wide network of credit unions in small communities.
He said credit unions and co-operatives could be important instruments in helping rural Canada meet its goals of economic development and diversification into value-added enterprise.
Quality, not quantity
And he argued the issue is not the amount of credit available to rural Canada, but the type of credit.
Both the bankers and the credit union representatives used their appearance to warn the government against expanding the mandate of the Farm Credit Corporation.
“The Farm Credit Corporation is now operating as a direct competitor,” said Poulin.
Instead of expanding the crown corporation’s mandate, which could happen as early as this fall, the government and the FCC should figure out how to work in co-operation with existing lenders like credit unions, he said.
Although the bankers and the credit union representatives appeared before the committee at the same time, almost all the MPs’ interest and questions were directed at the bankers.
Committee chair Andy Mitchell, a former rural Ontario bank manager, wondered if bankers consider rural loans a higher risk than urban loans.
The banker witnesses said they could not generalize. There may be less security but a better or more personal relationship with the prospective borrower, they said.
John Leckie, senior vice-president with the Toronto-Dominion Bank, said lenders are moving toward basing loans on cash flow potential rather than on collateral security.
Mitchell also raised the issue of damage done to rural communities when bank branches close.
The bankers said decisions to close banks reflect changing demand and customer base.
Leckie said having a physical presence in a small community is not the only way banks help the area. Increasingly, lenders are offering advice and counselling on how to set up successful rural businesses.
