Starting an agricultural business is hard, and without access to financing, it can be even harder to get started.
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Why is this important?Canada’s Indigenous communities are positioned to make a significant positive impact on the agriculture sector, but they need improved access to capital. Improving access to capital, while recognizing that these communities have historically been excluded from the sector, could help achieve this goal.
Many Indigenous communities in Canada face such challenges due to the structure of Canada’s reservation system and the systemic disenfranchisement historically inherent in that system.
But creativity in lending can provide opportunities.
That’s the role of Tatum Claypool, a Métis woman from North Battleford, Saskatchewan, and senior relationship manager in Farm Credit Canada’s Indigenous finance team. She’s also a 2024 Nuffield Scholar, researching how other countries have found ways to support Indigenous individuals and communities in developing their agricultural businesses.
For Claypool, Canada’s Indigenous communities are a relatively untapped resource when it comes to agricultural economic development. With favorable demographics and strong cultural ties to the land and agricultural production, the development of agriculture and food enterprises will benefit not only communities with fewer economic opportunities, but Canadian agriculture as a whole.
Problematic Indian Act
To understand why it is more difficult for Indigenous communities in Canada to start or grow an agricultural business, one must understand the Indian Act, the 1876 law that established Canada’s reservation system.
Claypool said that while the land formally belongs to the Crown, the Act stipulates that it is permanently reserved for local communities, meaning local residents cannot use the land as collateral to secure financing.
Echoing sentiments expressed by Indigenous entrepreneurs at the recent Future of Food Conference, Claypool says the collateral-based lending system and the perception of higher risk in the absence of traditional collateral are putting Indigenous businesses in a bind.
“Currently, lending on reservations is limited by Section 89 of the Indian Act, which limits the ability to take collateral. We specialize in helping individuals understand the Indian Act in agriculture,” she said of FCC’s broader Indigenous lending team.
“Personal asset collateral is protected from seizure by Section 89, which means if you can’t put up what you’re buying as collateral, it’s very difficult to get a loan. People often ask why Indigenous teams are different to traditional lending. We don’t have a base of accumulated capital that we can use to lend. How can you build generational wealth if you can’t use that tangible asset in farming…I want to get a credit bureau score, but I can’t get a loan. But I can’t get a credit bureau score, so I can’t get a loan. How can I grow my business within these limitations?”
But workarounds are possible: if an individual wants to buy or increase a cattle herd, for example, they may be able to take out a loan guaranteed by the community band. The FCC has also expanded the loan eligibility criteria to include the harvesting of wild plants and herbs, which were not previously considered a form of agricultural production.
Intentionally creating systemic barriers
The Indian Act is just one of several institutional barriers that have long stifled Indigenous agricultural entrepreneurs: the now-infamous “pass system” enacted in the decade following the Indian Act also compounded serious logistical challenges.
Established to allow the government to monitor the movements of Native Americans, this system required community members to get formal permission from the local Indian agent (a local representative of the federal government) to leave the reservations or to transact business. If the agent was slow to give permission or did not deem it appropriate for an individual to go, the person was legally barred from leaving the reservations.
“There are no passes or permits to access markets, not to mention cultural and all the other restrictions,” Claypool said. “It’s cattle sale day and you can’t even leave your community, so how can you go about doing business?”
“There were also fines for buying from indigenous farmers who did not have that pass or permit. It was a systematic exclusion from the market.”
Despite restrictions on freedom of movement, many Native American farmers fared fairly well, thanks to years of cultural knowledge rooted in living and working the land, Claypool says. Unfortunately, their success was intolerable to the governing authorities, who enacted the Peasant Farm Policy in 1889, which prohibited Native American farmers from using any but the most basic farm tools.
“It’s going from the pitchfork to the scythe, whether it’s horsepower or whatever,” Claypool says, adding that these restrictions on personal freedom and the ability to run one’s own business are not necessarily the norm among non-Indigenous people in Canada.
“As a farmer, read the Indian Act and imagine the restrictions that were placed on you. How would you have felt?”
revival
The effects of past wrongdoings and those government policies continue to this day. Despite that, Claypool says there is strong and growing interest in the agriculture and food sector among Indigenous peoples in Canada. She hopes that her Nuffield Scholarship research topic, Indigenous resurgence in agriculture, will help Canada think about how it can better nurture that interest and position entrepreneurs for success.
“I would like to see how efforts are being made in other parts of the world to help indigenous people return to agriculture for economic prosperity, knowledge acquisition and employment on reservations, and to support community members to stay on reservations and earn a living wage while caring for the land in the same way they have culturally cared for it,” Claypool says.
“How do people overcome systemic barriers? How do they create business structures, find financial institutions, get support for their farming enterprises, food sovereignty projects, and other things that re-engage their communities in agriculture?”
