👏 Letting the big W sink in

The productivity, resilience, inclusive growth and economic sovereignty objectives Canada is trying to achieve are not independent of its financing system. Canada ranks second-worst in the G7 as a place to be an entrepreneur, with 55 per cent of small-business owners saying they would not recommend starting a business here right now. A new SCP report by Michelle Arnold argues that this is not a reflection of the limits of our entrepreneurs, but the limits of our lenders - when it comes to SME financing, what the Big Banks can do is limited by how they're structured. If we want a stronger economy that works for workers, communities and small businesses, we need a financial system diverse enough to serve them.

Canada's enterprise financing system is dominated by big banks that control 93% of banking assets and nearly 80% of SME lending. While stable and respected, they have structural constraints—minimum deal sizes, rigid credit models, collateral requirements—that systematically stop them from lending to a range of viable businesses. The SMEs left behind include businesses looking for small loans, seasonal enterprises, non-profits, cooperatives and rural firms. If we continue to undercapitalize SMEs trying to get off the ground or grow, this will have cascading economic and social consequences. Canada needs alternative financing institutions that operate alongside commercial banking as permanent, scaled infrastructure.

Large Canadian pension plan OMERS announced earlier this week that it will attempt to increase its investments in Canada by $10B over the next five years. This is a good sign, says SCP CEO Matthew Mendelsohn, but announcements and good intentions will not be enough. The incentive structure for fund managers, and the allocation of resources across asset classes and geographies, will need to change if pension funds are able to deliver on what their contributors and beneficiaries expect of them.