Report to/Rapport
au:
Health, Recreation
and Social Services Committee
Comité de la santé, des loisirs et des services
sociaux
and Council/et au Conseil
12 November 2002/le 12 novembre 2002
Submitted by/Soumis par: Jocelyne St Jean, General Manager/Directrice générale
People Services
Department/Services aux citoyens
Contact/Personne-ressource: Colleen Hendrick, Director/
Innovation,
Development and Partnerships
Directrice, Innovation, développement et
partenariat
724-4122 ext. 24366, colleen.hendrick@ottawa.ca
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Ref
N°: ACS2002-PEO-IDP-0031
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SUBJECT: OTTAWA COMMUNITY LOAN FUND
OBJET: FONDS
DE PRÊTS COMMUNAUTAIRES D’OTTAWA
REPORT RECOMMENDATION
That the Health, Recreation and Social Services Committee
recommend Council approve the previous policy and practice
of the former Region of Ottawa-Carleton for designated donations to the Ottawa
Community Loan Fund (OCLF)
RECOMMANDATION
DU RAPPORT
Que le Comité de la santé, des loisirs et des
services sociaux recommande au Conseil d’adopter la politique et la pratique
de l’ancienne Région pour ce qui concerne les dons désignés au Fonds de prêts
communautaires d’Ottawa.
BACKGROUND
The Ottawa Community Loan Fund (OCLF) was formed in 2000 as
a non-profit corporation to provide Ottawa with a community-financing vehicle.
The OCLF provides loans to entrepreneurs, groups and individuals who wish to
achieve a greater level of self-sufficiency through self-employment or business
expansion.
As a community lender, the OCLF enlists donations and loans
from the local community, government and other non-profit organizations to
create a pool of funds. Loan capital is then lent out to promising individuals
or groups of people who are starting or expanding a business in the Ottawa
area.
OCLF works with people who have a solid business idea,
supported by a business plan but who are having difficulty obtaining financing
through traditional funding sources. Unlike larger financial institutions that
rely primarily on an applicant’s credit history and assets, OCLF uses criteria
that place a greater emphasis on an individual’s character, (how
is it assessed?),commitment
and ability.
OCLF provides loans up to $15,000 to groups and individuals
who have a solid business plan, practical work experience and/or training. In
addition, individuals and groups must demonstrate a commitment and ability to
develop or expand a business and must have the capacity to repay their loan so
that other borrowers can access OCLF financing. OCLF also works with the
Canadian Youth Business Foundation to provide loans to entrepreneurs ages
18-34.
By providing access to small amounts of capital, the OCLF
has a direct impact on new business creation, local employment and
investment.
DISCUSSION
Several community
reports have identified gaps related to accessing capital to promote
micro-entrepreneurs. These include the Mayor’s Task Force on Employment, the
Task Force on Poverty and various reports from the Ottawa Economic Development
Corporation. The studies identified the need to provide more support to
individuals who want to pursue self-employment and business expansion
opportunities. Access to financing was acknowledged as a barrier to pursuing
self- employment among low-income individuals and families.
OCLF funds are accessible
by people who are unemployed or under employed, including new Canadians, youth
and people receiving Ontario Works or Employment Insurance. Cooperatives and
non-profit organizations are also eligible to apply to the OCLF.
In 2001, the People Services Department entered into a
purchase of service agreement with the OCLF. This purchase of service agreement
provides $ 40,000 annually towards the operations of the program for three
years to assist people to become self-sufficient through self-employment.
In order to qualify as a registered charity as part of the
Community Economic Development Programs within the Canada Customs and Revenue
Agency, the OCLF would have to comply with very strict guidelines relating to
its policies for borrower selection, interest rates, loan repayments, loan
renewals, loan amount and structure etc. Compliance with these federal
requirements would limit the capacity of the OCLF from fulfilling its mandate
and by forcing it to adopt policies that may not be consistent with the purposes
of the OCLF.
As a result, two years ago the OCLF requested that the City
receive donations and issue tax receipts. To date, the City has processed seven
donations totaling $80,000.The OCLF will be embarking on a major fundraising
campaign in February 2003 with a goal of raising approximately $750,000 over a
three year period to meet increased loan demand.
The People Services Department strongly supports the OCLF
because this organization provides access to financing that many low-income
individuals and groups would not otherwise be able to obtain in order to launch
self-employment business opportunities. OCLF has assisted 14 low-income
individuals and groups to launch self-employment opportunities and to become
self-sufficient during the past two years.
In addition, the OCLF has provided financing to three individuals of
low-income to assist them in covering tuition costs and living expenses while
they become accredited through the Foreign Trained Teacher Initiative.
In total, the OCLF has disbursed 21 loans totaling $159,000
resulting in the creation or expansion of 16 businesses and three soon-to-be
accredited teachers. As the OCLF
approaches its second anniversary of lending, it has a default rate of 0%.
RURAL IMPLICATIONS
Individuals and groups in the
rural communities can also apply to this program for funds.
CONSULTATION
Not applicable.
FINANCIAL IMPLICATIONS
Donations are received from
donors to the Ottawa Community Loan Fund (OCLF); the City deposits the amounts
and a donation receipt provided to the donor. The City issues a cheque to the
OCLF for the amount designated by the donor.
There is no cost to the City as current resources are sufficient to
accommodate this process.
ATTACHMENTS
Annex 1 presents information on the OCLF service from a
user perspective.
Annex 2 presents a list of the
OCLF board of directors.
DISPOSITION
