The Bank of Canada wants the nation’s banks to create a national fund to invest in small- to medium-sized businesses – but some think the concept is attempting to solve a problem that doesn’t exist
The Bank of Canada is urging the country’s banks to create a national fund that would invest in small- to medium-sized businesses, according to a Globe and Mail report. The fund would be modelled on a controversial fund in the UK.
The plan, still in its early stages, is for banks to put money into a private-sector fund that would make $2 million to $20 million debt and equity investments in domestic small- to medium-sized enterprises (SMEs) to ensure they have the necessary resources to expand globally while still based in Canada, according to the Globe and Mail.
“We are good at starting companies in this country but not good at nurturing them,” one banker told the Globe and Mail. “There is agreement that seeing our best small companies snapped up by foreign buyers is a problem, and this fund is one way to deal with that problem.”
However, the plan is getting a “mixed reception,” according to the Globe and Mail. While some institutions are in favour of it, others question both the potential returns and the need for a fund in the first place. Sources told the Globe and Mail that Bank of Canada Governor Steve Poloz and CIBC CEO Victor Dodig both support the fund.
A CIBC internal study of the idea did find that the case for a Canadian SME fund was “not as compelling” as it is for the UK or Australia. However, “given the importance of the bank’s relationship with the Bank of Canada, CIBC should support and ultimately back and SME Growth Fund initiative in Canada, if funding gaps are properly investigated and capital commitments are well targeted at key segments that create future jobs/economic benefit.”
But others say the British program upon which the concept is based fills a need that doesn’t exist in Canada, the Globe and Mail reported.
“I’m not sure this (Canadian) fund solves a problem,” one bank executive told the paper. “The issues facing small- to medium-sized business are typically expanding outside Canada and building client relationships with large corporations, not access to capital.”
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The plan, still in its early stages, is for banks to put money into a private-sector fund that would make $2 million to $20 million debt and equity investments in domestic small- to medium-sized enterprises (SMEs) to ensure they have the necessary resources to expand globally while still based in Canada, according to the Globe and Mail.
“We are good at starting companies in this country but not good at nurturing them,” one banker told the Globe and Mail. “There is agreement that seeing our best small companies snapped up by foreign buyers is a problem, and this fund is one way to deal with that problem.”
However, the plan is getting a “mixed reception,” according to the Globe and Mail. While some institutions are in favour of it, others question both the potential returns and the need for a fund in the first place. Sources told the Globe and Mail that Bank of Canada Governor Steve Poloz and CIBC CEO Victor Dodig both support the fund.
A CIBC internal study of the idea did find that the case for a Canadian SME fund was “not as compelling” as it is for the UK or Australia. However, “given the importance of the bank’s relationship with the Bank of Canada, CIBC should support and ultimately back and SME Growth Fund initiative in Canada, if funding gaps are properly investigated and capital commitments are well targeted at key segments that create future jobs/economic benefit.”
But others say the British program upon which the concept is based fills a need that doesn’t exist in Canada, the Globe and Mail reported.
“I’m not sure this (Canadian) fund solves a problem,” one bank executive told the paper. “The issues facing small- to medium-sized business are typically expanding outside Canada and building client relationships with large corporations, not access to capital.”
Related stories:
Government must provide better incentives to investors: IIAC
BoC rate hold points to calming markets
