Financial Institutions and the Taxi-Cab Industry: An Exploratory Study in Canada

A current challenge taxicab owner/operators face in Canada is the lack of financing for taxicabs. This article examines business opportunities and lending risk; it also provides risk management strategies for financial institutions to manage the risk of lending to the taxi-cab industry. Members of the boards of directors and shareholders from the Canadian taxicab industry, and lenders from financial institutions that do not provide financing to taxicab owner/operators, were interviewed. Board members and shareholders were asked about their perceptions regarding business opportunity, risk, and their willingness to provide collateral for taxicab loans. Lenders of financial institutions were asked about their reasons for not providing taxicab loans. The findings of this study show that there is a reasonably attractive opportunity for financial institutions to offer financing for taxicab owner/operators. However, the findings also show that there are both systematic and unsystematic risks in lending to the taxicab industry. This offers recommendations on risk management strategies for Canadian lenders to mitigate the risk in lending to the Canadian taxicab industry. Our findings may be useful for new and existing financial/lending institutions, lenders, investors, and taxicab owner/operators.