On May 7, Shorefast Founder and CEO Zita Cobb was invited to speak with the Standing Senate Committee on Banking, Commerce and the Economy.
Senate Testimony
Zita Cobb, Founder and CEO, Shorefast (registered charity) and the Shorefast Institute for Place-Based Economies
Merci President Gignac.
Mesdames et Messieurs du Sénat,
Je vous remercie de cette invitation.
I’m Zita Cobb, Founder and CEO of Shorefast and the Shorefast Institute for Place-Based Economies.
At the root of my remarks is a question about what has value to Canadians, and how we protect, develop and care for it.
I come from Fogo Island, off the northeast coast of Newfoundland, one of the 5,000 incorporated communities that make up this country: places where social, cultural and economic capital has formed over generations. Twenty years ago, my brothers and I came home to do what we could for our island’s economy. In doing this work we learned that the market and government institutions that shape our economy do not optimize for where Canada’s assets reside – in the places we live.
A strong nation is the sum of strong places. Beneath the many crises we hear cited most often – housing, affordability, economic opportunity and mental health- sits a crisis of place.
WHAT IS POSSIBLE?
Fogo Island is a community of about 2,200 people. It has faced what thousands of Canadian communities know increasingly well: out-migration, an aging population and the squandering of valuable assets made dormant by policy and investment decisions that are made far away from where the impact lands.
Shorefast created the Fogo Island Inn, which opened in 2013. The Inn employs more than 220 people and is widely recognized as the leading global model of community-led, regenerative tourism. More than half of every guest dollar stays on Fogo Island; more than 96 per cent stays in Canada. To make that flow of money visible, Shorefast developed, trademarked and deployed Economic Nutrition Labels, a tool that shows, with the clarity of a food label, where money goes when you spend it.
Since 2013, our Shorefast work on Fogo Island has contributed more than $270 million to Canada’s GDP. If even 10 per cent of Canada’s 5,000 communities achieved Fogo Island’s economic growth in absolute terms, the result would be an additional $135 billion to our national GDP. If sustainable economic development is possible in a small community on the edge of the Atlantic, it is possible in communities across this country.
WHAT STANDS IN OUR WAY?
SMEs account for two-thirds of Canada’s employment and contribute close to half of our GDP. Yet only 11.5% of outstanding business loans in Canada go to SMEs. The OECD median is 44%. We are an extreme outlier.
Roughly 85% of Canadian municipalities do not have a bank branch within their boundaries. Even where a branch remains, credit decisions are made elsewhere. Small business lending is rooted in local knowledge and relationships — and we have systematically removed both. Where lending is available to SMEs, it is expensive and imposes great personal risk: personal guarantees, family homes pledged as collateral.
This lack of financial access has made Canada a country of stranded assets.
Three-quarters of Canadian small business owners plan to exit within the next decade. Without a financing pathway for sales to potential new local owners, employees or community trusts, that wave of retirement will accelerate closures and consolidation into distant ownership. It does, in the end, matter who owns what and where they are.
Our financial regulators could say, as Prospero says in The Tempest, that the system is “so safely ordered” — no hair lost, banks well-capitalized. But that accounting is blind to the businesses that never opened or expanded, the successions that never happened, the communities that quietly hollowed out — and we see this in communities across the country.
Blindness to our true assets and subpar risk aversion is not in our people; it’s in our institutions.
WHAT WOULD HELP?
One: Strengthen what we have.
Community Futures and CBDC offices offer expensive debt and have a loss rate of less than one per cent — far below the federal benchmark of 10 per cent. That is not strength; it is the system holding capital back. BDC’s mandate should permit, even expect, the kinds of losses that allow a development bank to deploy real capital. A development bank making profits is not lending; it is rationing.
Two: Get the regulatory frame right.
OSFI’s mandate is to protect against the failure of the system, not to deliver zero individual failures. Recalibrating risk weights is in federal hands. Require big banks to serve SMEs across a variety of geographies; enable new intermediaries such as fintechs, and enable credit unions by such measures as removing interprovincial barriers and expanding their capital pools.
Three: Align incentives.
Tax incentives for employee ownership trusts and community-ownership transactions, paired with an enhanced lifetime capital gains exemption for owners selling within their community would help level the playing field.
Four: Make money visible. Align procurement.
Adopt Economic Nutrition Labelling to align government procurement with economic priorities. Knowing where money goes is the first step to directing it better and buying from SMEs is a form of financing.
In Closing
Fogo Island is one example of what is possible when a community activates its own assets. Our story may be extraordinary, but it need not be exceptional. Canada is rich in places that hold human and natural assets. We need to activate them.
Twenty years of work has taught us that the deepest obstacles are not in our communities — they are in our institutions. Our economy has been optimized for large institutions, often at the expense of places.
The federal role is to change that: to build the frameworks that allow capital to flow to small and medium-sized businesses across the country, in every region, in communities of every size. The scale and reach of the solutions must match the scale and reach of our Canadian reality.
Let’s optimize for that. If we want to strengthen the nation, we must include the country.
Thank you. I look forward to your questions.
































