Western Economic Diversification Canada
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Relevance of the Program

This chapter summarizes the major findings of the evaluation with respect to the continued need for the program, relationship with other programming and alignment with departmental and federal government roles and responsibilities.

Continued Need For The Program

Access to Capital and Business Development Services

The Canadian Provinces: Key Small Business Statistics published by Industry Canada in September 20137 noted that SMEs represented close to 99.9 percent of all business establishments providing about 89.9 percent of all jobs in the Canadian economy. The distribution of business establishments in the publication in Western Canada is provided in the table below.

Business Establishments in Western Canada
Province Business establishments with employees Small businesses (1–99 employees) Medium-sized businesses (100–499 employees) Large businesses (500+ employees) Percentage of SMEs
Manitoba 35,980 35,298 622 60 99.8
Saskatchewan 38,749 38,264 457 28 99.9
Alberta 154,495 151,866 2,397 232 99.8
British Columbia 171,557 169,178 2,218 161 99.9

The publication shows that a significant proportion of SMEs in Western Canada is located in rural areas in Manitoba (28.9 percent), Saskatchewan (45.1 percent), Alberta (16.7 percent) and British Columbia (11.8 percent). Alberta and Saskatchewan have the highest number of SMEs relative to the total working age population (50.3 SMEs per 1,000 inhabitants in Alberta and 47.8 in Saskatchewan) in Canada. In addition, Saskatchewan ranks first in terms of the proportion of high-growth8 SMEs (13.2 percent), followed by Alberta (9.3 percent) and British Columbia (9.2 percent) in Canada.

The Credit Conditions Survey published by Industry Canada9 on SME financing provides information on changes in access to capital conditions for SMEs. The publication states that SME financing requests have gone up significantly since the recession. 34 percent of SMEs requested financing in 2012 compared with 16 percent in 2009. Approximately 44 percent of SMEs that requested financing in 2012 reported doing so to support day-to-day working and operational capital expenditures. The publication concludes that overall, business lending conditions continued to ease in 2012, however, certain sub-categories of businesses such as start-ups and exporters continue to face greater difficulties in accessing financing.

The Organization for Economic Co-operation and Development (OECD) Working Group on SMEs and Entrepreneurship in a report10 recognises that SMEs and entrepreneurs play a significant role in all economies and are the key generators of employment and income and drivers of innovation and growth. The paper stated that access to capital continues to be one of the most significant challenges for the creation, survival and growth of SMEs. This was particularly evident during the fallout from the 2008-09 financial crises. The report concluded that even in stable economic conditions governments recognised that to survive and grow, SMEs need specific policies and programs. The Working Group supported moves by governments to implement policies and programs such as the CFP in response to the financing needs of SMEs.

The CFP was implemented to provide access to capital, business development services and community economic development in rural Canada. The evidence from the key informant interviews suggests there is a demonstrated and ongoing need for the CFP in all areas particularly in access to capital and business development services. The majority of respondents across respondent types indicated that there is an ongoing need for the program. Respondents provided a rating of 4.6 (out of 5) on the need for access to capital. The most commonly reported driver of this need was related to providing loans to clients who were unable to access funds from other sources because they are viewed as high risk by traditional lenders (particularly in rural and/or smaller communities). The mean rating for the need for business development services was slightly higher than for access to capital with a score of 4.74 (out of 5).

Survey findings indicate that CF Managers and Board Chairs strongly believe that the need for CFP services exists to a great extent (97 percent). A large majority of respondents reported a high need for access to capital (98 percent) and business development services (97 percent). The majority of CF clients (79 percent) and CF Partners (78 percent) indicated that the need for the various CFP services in their region exists to a great extent. The majority of CF partners reported a great need for access to capital (72 percent) and business development services (78 percent).

An Industry Canada report on SME financing11 identified a category of SMEs, which it termed as discouraged borrowers. These categories of SMEs have a need for financing but do not actively seek financing because they believe, correctly or not, that their requests will be turned down. This belief stems from a variety of factors, including: the rejection of past requests; a shortage of capital in the region or industry sector; discrimination; poor or lack of credit history; lack of equity; lack of collateral to pledge as security; and lack of expertise and/or managerial skills. In the 2010 Industry Canada Credit Conditions SME Survey, it was determined that approximately 3 percent of SMEs that did not apply for financing chose not to do so because they thought their request would be turned down. These SMEs sometimes turn to programs such as the CFP to address their financing needs.

CF clients interviewed for the case studies viewed the CFs as their last resort to secure funding to start, maintain or expand their businesses. The client survey revealed that the majority of clients who applied to the CF for funding were previously denied funding from other sources (56 percent). Some clients (17 percent) noted that the CF loan assisted them in securing funding from other sources. The table below indicates the most common reasons that clients provided for not being approved for loans from other institutions.

Text Description, Figure 3: Common Reasons CF Clients not approved for loans from Other Organizations

In this figure, CF Clients indicated the common reasons they were not approved for loans when they applied to other organizations.

The CFP exists to provide access to capital and business development services to SMEs and entrepreneurs who would otherwise not be able to access these services from traditional banking institutions.

Community Strategic Planning and Community Economic Development

The terms and conditions of the CFP provides for the CFs to undertake activities related to community strategic planning12 and support for community economic development13. Survey respondents indicated a need for community strategic planning and community economic development in their regions. However, respondents provided a lower rating for this compared to the need for access to capital and business development services. The survey of CF Managers and Board Chairs provided a rating of 80 percent on the need for community strategic planning compared to a rating of 97 percent on the need for access to capital and 98 percent on business development services. CF Partners surveyed provided a rating of 72 percent on the need for access to capital and 78 percent on business development services compared to a rating of 63 percent for community strategic planning.

Respondents in the key informant interviews saw a lower need for community strategic planning and community economic development activities with an overall mean of 4.26 across respondent types. A lower number of key informants (31 out of 60) were able or willing to provide a response which is likely indicative of the fact that they were not familiar with CF involvement in activities related to community strategic planning and community economic development. Some case study respondents expressed the need for better clarity from the department around activities that would be classified as community economic development. The emphasis on community strategic planning and community economic development activities vary by community depending on the resources of the CF. Some CFs invest a large portion of their time and effort in this while other CFs are primarily involved in access to capital and business development services.

Some key informants indicated the demand for community strategic planning and community economic development activities had been decreasing as the communities developed the capacity to undertake these activities themselves. Almost all case study respondents indicated the absence of dedicated CF resources to undertake community strategic planning and community economic development activities. In most cases, community strategic planning and community economic development activities were undertaken by the CF Manager. Given the broad definition for community economic development activities, some case study respondents expressed the need for clarity from the department on this objective. In addition, it was recognized by evaluation advisory committee members that reporting in this activity is quite subjective. It will be beneficial for the department to further clarify the CFP activities in community strategic planning and community economic development in order to better enable accurate performance reporting. The consensus among key informants was that a decrease in resource levels is likely to result in a decrease in some CFP services especially in community strategic planning and community economic development.

Gaps in CFP Services

In terms of possible gaps in services that CFs could be addressing, most evaluation respondents did not offer any suggestions. Case study clients and some key informants suggested the need for the CFs to do more to promote their services in their catchment areas. Case study clients expressed challenges for their businesses in finding and maintaining skilled employees and suggested that the CFs could provide training to help their clients in this area.

Complementarity/Duplication/Overlap with Other Organizations

Traditional financial institutions such as banks and credit unions in the communities served by the CFs offer business services such as access to capital for entrepreneurs.

Respondents in the evaluation provided suggestions on federal organizations that provided business services in their communities. The organizations most commonly mentioned include:

  • Business Development Bank of Canada (BDC) – The BDC is a financial institution owned by the Government of Canada. The BDC delivers financial and consulting services to SMEs in Canada, with a particular focus on the technology and export sectors of the economy.
  • Canada Youth Business Foundation (CYBF) – Funded by the federal government, the CYBF is a non-profit organization founded in 1996 that provides young entrepreneurs with loans and mentoring services. Entrepreneurs must be between the ages of 18 and 34 to qualify for assistance form the CYBF. Young entrepreneurs can obtain up to $15,000 in start-up capital.
  • Canada Small Business Financing Program (CSBFP) – The CSBFP is funded by the federal government and delivered through traditional financial institutions to help SME start-ups and established firms improve and expand. The program provides up to $500,000 in loans to qualifying SMEs. The financial institutions are required to take security in the assets financed.
  • Women's Enterprise Initiative (WEI) – Funded by the department, the WEI provides assistance to women entrepreneurs including advisory services, training options, networking opportunities, business loans and referrals to complementary services.

Provincial governments also provide programs which provide business services in the communities served by the CFs. The programs include:

  • Business Start Program – The Business Start Program funded by the provincial government of Manitoba provides up to $30,000 in loans to start-ups through participating financial institutions. Participants are required to contribute 40 percent of the loan amount requested.
  • Small Business Loans Association (SBLA) Program – Funded by the provincial government of Saskatchewan, the SBLA program makes funds (up to $20,000) available to entrepreneurs through local, community-run associations. Some CFs in Saskatchewan are involved in delivering this initiative on behalf of the provincial government.

The evaluation team explored the potential for overlap with the traditional financial institutions and the BDC, CYBF, CSBFP and WEI. Specifically, the BDC and traditional financial institutions have a greater urban/larger community presence, serve more established businesses, offers larger loans and charge for their business development services. Traditional financial institutions have a lower risk tolerance, spend less time working with clients to develop the business idea and work primarily with "bank-ready" clients. While credit unions have more flexibility to work with more risky clients, their risk tolerance was generally viewed to be lower than that of the CFs. The CSBFP is accessed through financial institutions and thus clients are subject to the same requirements as banks and credit unions. The CYBF and the WEI provide services to entrepreneurs who are youth or women respectively. The CFP does not have such limitations and therefore provide services to a much broader entrepreneur group.

Most key informants and survey respondents reported that the CFP does not duplicate or overlap other federal, provincial or other programs. Key informants identified mechanisms in place to minimize overlap and duplication. The most commonly mentioned mechanisms were collaborations, partnerships and referrals among complementary programs. CF Managers in the case studies indicated that the CFs and some of the financial institutions in the community do refer clients to each other. In some cases, the CFs assisted clients with the development of business plans in order for them to secure funding from other institutions. The CFs in some instances collaborate with other institutions to provide loans to the same client and share the risks. Some CF clients upon rebuilding their credit history are able to secure lower interest loans from other institutions rather than to pay the higher interest loans from the CFs.

Alignment with Departmental and Federal Government Priorities

The terms and conditions of the CFP states the ultimate objectives as Economic stability, growth and job creation Diversified and competitive local rural economies Economically sustainable communities.The 2014–15 Report on Plans and Priorities for the department aligns the CFP with the Government of Canada outcome of "Strong Economic Growth." The objectives of the CFP align with departmental priorities in Business Productivity and Competitiveness as stated in the department's corporate business plans from 2008 to 2012. The Speech from the Throne on October 201314 emphasized the federal government's top priority as job creation for Canadians. The objectives of the CFP align with this priority.

Key informants indicated that there is appropriate alignment between the objectives of the CFP and federal priorities/strategies. Job creation and economic development were the most commonly cited areas of alignment.

Consistency with Federal Roles and Responsibilities

The objectives of the CFP aligned with the roles and responsibilities of the department as a federal government agency. The mandate of the department is to promote the development and diversification of the economy of Western Canada and to advance the interests of the West in national economic policy, program and project development and implementation. The department delivers programs such as the CFP to create strong and sustainable communities.

Most key informants and survey respondents indicated that the CFP is aligned with the federal government's roles and responsibilities. The most common reasons for alignment included the fact that CFP represents a unique federal presence in communities and drives economic development in the communities. Federal government involvement in the program was also viewed as providing program stability.


[7] http://www.ic.gc.ca/eic/site/061.nsf/eng/h_02816.html

[8] "Growth-rate" indicated by firms that have grown 20 percent between 2006 and 2009 as stated in data from Statistics Canada and the Organisation for Economic Cooperation and Development.

[9] Credit Condition Trends 2009–2012. Published by Industry Canada in November 2003 http://www.ic.gc.ca/eic/site/061.nsf/eng/02829.html

[10] The Impact of the Global Crisis on SME and Entrepreneurship Financing and Policy Responses. Report published by the OECD in 2009 http://www.oecd.org/industry/smes/43183090.pdf

[11] Small Business Access to Financing: Request and Approval Rates, Interest Rates and Collateral Requirements. Published by Industry Canada on July 2013

[12] The CFs partner with other local organizations to develop and update strategic plans that guide local economic development. CFs may lead in strategic planning by bringing together community groups in the development of the plans.

[13] CFs serves as partners and provides financial and in-kind support (e.g., advice, information and administrative support) for community-based projects and special initiatives.

[14] http://speech.gc.ca/eng/full-speech