The FNFA was built to provide First Nations with an equivalent access to capital markets enjoyed by other governments. The enabling legislation, the FNFMA, sets out the powers and the regulatory framework for First Nation borrowing through the FNFA that mirrors the features of investment-grade rated government borrowing authorities around the world.
Large governments, such as national and provincial governments, major cities, and utilities have the capacity to manage their own public borrowing and have built the institutions to finance their infrastructure needs by going to the capital markets directly with highly rated government bonds. Smaller regional and local governments, however, do not have the size, the know-how or the level of financing expertise to access capital markets directly with the investment-grade credit rating necessary to attract institutional investors. (i.e. low rate loans).
Several provinces have developed solutions to remedy this situation based on the pooling of the financial needs of their local and regional governments to achieve the volume necessary for them to access the capital market directly. The size, stability, and diversification of provincial finance authorities such as the Municipal Finance Authority of British Columbia (MFA), after which the FNFA is modeled, allow them to access the financial markets directly by issuing bonds or debentures on behalf of their members. This means lower interest rates, lower transaction costs; it provides borrowing governments with the option to choose the term or repayment period that best suits their needs and to lock in interest rates for the full repayment term. Predictable low costs, and the flexibility to set repayment terms to match budget capacity enables governments to plan better, and to stretch their resources for growth.