The traditional western practices of financial institutions are not always sympathetic to the needs of indigenous entrepreneurs. Traditionally banks provide finance to businesses based on two tests; the strength of the business model – the credit test, and the quality of the assets against which a mortgage is placed – the asset or lending test.

The asset test exists to protect the banks where the credit test – or business model, fails. In this situation the bank can lay claim to the residual assets of the business and liquidate them in an attempt to recoup the loan.

Whilst many potential borrowers have focussed on the asset test, the credit test provides a unique opportunity for indigenous businesses. For example a native title grant may provide exclusive use of a particular area or natural asset.

In a commercial sense this strengthens the viability of a business because this monopoly title means there is limited competition. This strengthens the business case because any potential income stream would be protected from dilution that competition might bring.

Accordingly it can be demonstrated that real asset value can be created through cultural and spiritual entitlement. Of course this is not a total substitute for freehold but it represents asset value that could be used as an alternative to traditional forms of security for debt.

Tourism is a services based industry. So the assets of the tourism business don’t have to be land or infrastructure.
For example, Paul Cave doesn’t have to own the Sydney Harbour Bridge to make money out of his Bridgeclimb business.
Prue, Neil and Angie Hewett at Cooper Creek Wilderness don’t have to own the 135 million year old Daintree Rainforest to make money out of wilderness tours.

Furthermore, one of the main strengths of these examples is the fact that they have a unique business model.
So when approaching the banks for a loan, indigenous communities and fledgling tourism businesses without security of title should look to offer other ‘assets’ to a lending institution.

In this context, assets are indigenous knowledge such as traditional understanding of local geography, flora and fauna. Or cultural assets such as a particular dance that can only be performed in a specific area with access by one tribe through native title.

There is clearly opportunity here for indigenous communities to maximize their comparative advantage and gain maximum leverage to get their business model up and running. You don’t therefore need bucket loads of equity to make a tourism business work. You do need an innovative product and a unique selling proposition. Yet to date, one of Australia’s major banks informed me it has not had a single application for funding using any exclusive land access rights under native title.