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Shannin Metatawabin, chief executive officer of National Aboriginal Capital Corporations Association in Toronto on June 15.Cole Burston/The Globe and Mail

A government-backed loan fund for Indigenous entrepreneurs has received its first private-sector investment with a $3-million commitment from U.S. fintech Block Inc. SQ-N

The Indigenous Growth Fund, which was launched in the 2019 federal budget and made its first disbursements in March, is managed by the National Aboriginal Capital Corporations Association (NACCA), an umbrella group for more than 50 Indigenous-controlled lending agencies known as Aboriginal Financial Institutions or AFIs.

The fund directs capital to AFIs so they can make loans to entrepreneurs in their communities. Indigenous entrepreneurs face systemic barriers to lending at other financial institutions, such as restrictions on owning property on-reserve, that make it harder to post collateral for bank loans.

Block’s investment was announced Thursday and joins $150-million in public funds from the federal government, the Business Development Bank of Canada and Farm Credit Canada.

Shannin Metatawabin, NACCA’s chief executive, said it was important for the long-term prosperity of the fund and Indigenous communities to work with private-sector partners.

“The Government of Canada can’t be always relied on to provide all the capital to the Indigenous community,” Mr. Metatawabin said. “We need the capital market to participate and we need instruments created that allow them to participate in the ways that they understand and that they earn interest back.”

Block’s $3-million investment makes it a limited partner in the fund and allows it to redeem the investment over time.

The technology company, which also offers a range of financial products to small businesses through its Square arm, said in a news release that the money comes from a US$100-million commitment to direct money to underserved groups.

Mr. Metatawabin said the Indigenous Growth Fund is courting more private-sector investors by making the case that the fund is a good way to meet environmental, social and governance (ESG) goals.

“I think Indigenous people are a big part of the S criteria,” he said.

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