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By Paula Sambo<\/strong><\/em><\/p>\n (Bloomberg) <\/em>\u2014 Vancity, one of Canada\u2019s largest credit unions, and an Indigenous-owned private credit firm launched a $100 million partnership to finance housing projects.<\/p>\n Indigenous communities face some of Canada\u2019s most severe housing shortages and more limited access to conventional mortgage financing, according to federal housing and census data.<\/p>\n The partnership between Vancity and Keewaywin Capital is designed to address a long-standing gap in construction financing on Indigenous lands, where major banks have largely avoided lending, according to Tracee Smith, Keewaywin\u2019s chief executive officer and founder.<\/p>\n \u201cThis is a company I didn\u2019t really want to have to start,\u201d said Smith, a member of Missanabie Cree First Nation in northern Ontario who spent more than a decade working in banking.\u00a0<\/p>\n \u201cFirst Nations get government transfers just like any municipality in the country,\u201d she said. \u201cSo if anything, they should be considered strong credit, but that\u2019s not how it works.\u201d For example, federal law prevents Indigenous land from being used as collateral, pushing communities toward government programs or alternative lenders.<\/p>\n In 2011, Vancity began recognizing First Nations as governments for lending purposes, the first financial institution in Canada to do so, according to a statement. It has since worked with several First Nations to co-develop banking solutions.<\/p>\n Under the Keewaywin arrangement, Vancity\u2019s investment bank subsidiary will provide as much as $100 million in credit facilities, covering up to 90% of individual project costs. Keewaywin will provide short-term construction financing, typically for 18 to 24 months, before Vancity steps in with long-term mortgage financing once projects are completed.<\/p>\n The model allows Keewaywin to focus on the riskiest phase of housing development, while recycling capital into new projects once permanent financing is in place.<\/p>\n Keewaywin is targeting returns of about 7%, Smith said, while charging borrowers roughly 9% interest during construction. Vancity\u2019s long-term loans are expected to price at about 6% to 6.5% over 20 years, lowering the blended cost of capital once projects are completed.<\/p>\n Smith said the fund aims to finance between 300 and 500 housing units over five years. Keewaywin\u2019s investors include the federal government\u2019s Canada Mortgage & Housing Corp., Vancity, Addenda Capital and several family offices, Smith said.<\/p>\n Her longer-term goal is to prove the model\u2019s viability and attract larger pools of institutional capital, including from pension funds, and ultimately force major banks to rethink their approach, Smith said.<\/p>\n \u201cWe\u2019re going to show you how to do it,\u201d she said. \u201cMore money should flow into this, and everyone can make money too. No one\u2019s asking for free money here.\u201d<\/p>\n
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