|
The Globe and Mail - Charity Bank Has Currency
Aaron Pereira is 23 years old and he wants to start a bank. Not just any bank, but a federally regulated financial institution for charities called the Community Bank. He got the idea a couple of years ago when he ran into trouble lining up financing for his own Toronto-based charity, CanadaHelps, which he started with two friends while they were at Queen's University. "We didn't have access to short-term credit," Mr. Pereira says. He looked around and noticed that other countries had banks dedicated to providing loans, mortgages and investment advice to charities and decided Canada needed one, too. He took his concept to Tim Brodhead, who runs the J.W. McConnell Family Foundation in Montreal. Mr. Brodhead was impressed and they soon assembled a team of prominent backers, including Ed Waitzer, former chairman of the Ontario Securities Commission, Judith Maxwell, former chairwoman of the Economic Council of Canada, and a long list of companies, including Bank of Montreal. Last year, the group approached the federal government about the bank and, in the recent federal budget, Ottawa endorsed the idea. If all goes well, the Community Bank will open next year. Under the current plan, the bank will hold deposits and provide a range of financial services to non-profit groups. It will also be a registered charity. "What we would be looking to provide are deposit products, credit products and other advisory products to charities across the country," Mr. Pereira said. He added that many of the services would be available online. "We are not going to try and recreate the wheel here. Canada has really, really significant financial infrastructure." The group is looking to partner with traditional banks to develop a network of branches. Eventually, the Community Bank could expand and accept deposits from the general public and offer more services such as investment banking or money management. The idea is based partly on Britain's Charity Bank, which opened in 2002 and has provided about £9.2-million ($22-million Canadian) in loans to 88 organizations. Charity Bank accepts deposits from the public that are treated as donations in some cases and are also eligible for tax breaks. The Community Bank won't target public depositors at first, but it will encourage charities to pool their financial assets, said Lynne Toupin, who heads a research group on the voluntary sector and is also involved in the bank project. "This is the aggregating of resources and assets collectively so that hopefully we are going to get reduced costs," Ms. Toupin said. "There is a power there. Almost one million people work in the voluntary sector and there are 80,000 organizations and millions of dollars in assets." Mr. Brodhead said the bank is crucial because charities have found obtaining financing more difficult in recent years. Major donors and government agencies prefer to back specific projects, not administration costs, he said. That has "triggered a gathering crisis as organizations have to find other ways of supporting their basic administration so they could actually carry out the projects that they were getting funding for." He added that the big banks are leery about lending to non-profit groups because they often lack steady cash flow and are perceived to be high risk. Banks also want to avoid the embarrassment of having to call in a loan to a charity. Mr. Brodhead said he is amazed at how quickly the Community Bank idea has been embraced by charities, the private sector and government. "I thought there would be a lot more people saying, 'No, no. This isn't possible.' Where in fact what we have encountered is a very positive reaction." He gives much of the credit to Mr. Pereira. "Sometimes these things need a fresh pair of eyes. People like us have been in this for a long time and you get a bit resigned to, 'We can't do that. We can't do this,' and someone like Aaron comes along and says, 'Well, why not?' " Mr. Brodhead laughed when asked about Mr. Pereira's age. "My first meeting with Aaron, I suggested that we have a chat at the bar at the Royal York [Hotel]. He said, 'I don't think I can get in yet.' " So, we had to have a drink at the snack bar." Mr. Pereira is well placed to help start the Community Bank. CanadaHelps is an on-line service that funnels donations to registered charities (expenses are covered by corporate donations). He deflects attention to others in the group. But asked whether he is excited about the prospect of it becoming a reality, he replied: "It is kind of exciting to see the kind of value that this could create within the sector.
|
Other StoriesKetchum Canada Voluntary Sector |