Today is National Day for Truth and Reconciliation here in Canada. It’s important that we all take the opportunity to research and learn more about all the work we have left to do in order to undo the generations of damage caused by the residential school system. As someone who writes about personal finance, one lens I’ve not explored yet is how to close the gap in financial literacy between indigenous and non-indigenous communities.
Background
Indigenous peoples constitute 4.9% of the Canadian population, but because of low income, low financial literacy and high unemployment rates, they make up 29% of our country’s homeless population. So how did we get here?
Part of the assimilation efforts and oppression our forefathers inflicted upon Indigenous communities was the elimination of their traditional trading and bartering systems. Forcing Indigenous peoples to switch to a monetary financial systems placed them at an immediate disadvantage relative to the settlers who had brought the system over to Canada, given they were already familiar with it.
Challenges Facing Indigenous Peoples Today
Access
Fast forward to today, where Indigenous communities still suffer from a lack of access to financial institutions – in Ontario, for example, just five out of 123 reserves have access to financial institutions, according to research from Prosper Canada back in 2015. Fully 15% of Indigenous Peoples are estimated not to have a bank account.
What they do have access to are Payday loans, which will provide advance cheque cashing at predatory interest rates (which can actually amount to over 100% interest per year, at a rate of 4% per paycheque cashed). This creates a vicious cycle that helps perpetuate poverty among Indigenous peoples.
The Shift to Online
Another factor that compounds the inequity is the rise of electronic banking. Fewer people in Indigenous communities own computers, making it progressively more difficult to participate in our financial system as we rely more and more on electronic forms of banking.
Fear of Rejection
It’s not just a lack of access to mainstream financial institutions though; another issue is the distrust of these institutions among those who can access them. Due to lower incomes that are, on average, more than 20% below that of the national average (the causes of which are a whole other topic), people from Indigenous communities tend of have lower credit scores, and a corresponding fear of rejection or judgment when walking into a mainstream financial institution. That’s something that many people in Canada face… except it’s amplified for Indigenous people.
The Education Gap
Financial literacy isn’t high on the list of priorities for many people from Indigenous communities, and it’s no wonder, considering the myriad of other challenging they face on a daily basis. When you’re focused on meeting your physiological and safety needs, it becomes hard to move up to those higher categories on Maslow’s Hierarchy of Needs.
Where do we go from here?
Much of the content from this post was pulled from a fantastic study posted on the Government of Canada website. It was conducted by Samantha Kremer and Katie Mah, and it explores a number of potential solutions to help close the gap in financial literacy and prosperity among Indigenous communities. I highly encourage you to visit that page and read through the entire article, and then consider how you can take action to support the proposed solutions.
