How Canada’s Finance Sector Hinders Legal Cannabis Growth
The Canadian banking sector’s persistent refusal to engage with legal cannabis businesses has amplified challenges within the industry, intensifying black market operations. Industry advocates express their concerns over this ongoing issue, highlighting the considerable impacts on legal businesses.
A striking example of this issue is the Cannabis Council of Canada, a prominent Ottawa-based organization advocating for licensed cannabis businesses, which faces significant hurdles in obtaining basic banking services. Despite their legal status and non-involvement in cannabis handling, the Council struggles to open accounts with any of Canada’s top five banks, resorting to Alterna Savings at a costly annual fee of $4,000, plus monthly charges, for basic services.
The broader licensed cannabis sector in Canada, now in its sixth year of legal operation, continues to face stark banking challenges. Entrepreneurs like Sam Gerges, who established the successful MaryJane’s Cannabis shops in Toronto, encounter roadblocks in accessing fundamental financial services, such as business bank accounts and loans, compelling them to seek private lenders.
Nick Baksh, another Toronto cannabis retailer, echoes these frustrations, pointing out the additional barriers faced by cannabis businesses in Canada’s already challenging retail framework. This lack of banking support undermines opportunities for entrepreneurs and hinders the growth of legal cannabis operations.
The situation has also led to personal financial challenges for business owners. For instance, Gerges experienced a revoked mortgage pre-approval upon the bank’s discovery of his cannabis business income, a scenario that reflects the broader reluctance of Canadian banks to engage with the cannabis industry.
Industry leaders suggest that this cautious approach by Canadian banks might be influenced by their significant presence in the United States, where cannabis remains federally illegal despite state-level legalizations. The banks’ hesitation to support legal cannabis businesses in Canada could be attributed to concerns about their image with U.S. treasury officials.
The National Post sought comments from several major Canadian banks, with RBC being the only respondent. RBC stated that it evaluates business relationships individually, ensuring compliance with laws and internal risk parameters.
Critics argue that this hesitancy from Canadian banks not only stifles entrepreneurship in the legal cannabis sector but also inadvertently supports the illicit market. As illegal operators easily access financial services like bank accounts and e-transfer options, the regulated sector finds itself at a disadvantage, questioning the benefits of remaining within the legal framework.
This situation calls for more proactive support from governmental and financial regulatory bodies to facilitate better conditions for the regulated cannabis space, ensuring fair competition and fostering the growth of legal businesses.
