Canada's major banks and insurers said on Thursday they planned to create a fund to invest up to $1 billion in small Canadian businesses over the next decade to bolster growth.

The fund is expected to have an initial capital commitment of more than $500 million. Initial participants will include the country's six major banks, as well as insurance companies, although a range of financial institutions will be able to invest in the fund when it is formed.

Victor Dodig, chief executive of Canadian Imperial Bank of Commerce (CM.TO), who was one of the earliest supporters of the initiative and played a prominent role in setting up the fund, said it could expand beyond $1 billion.

"I'm pretty confident that the first initial tranche is necessary and then from that we will find out how much more is needed," he said in an interview. "What we wanted to do is get things going. Part of this is getting traction."

Dodig said Canada's biggest pension funds could also invest.

"The pension funds can play a role. They're a vast source of capital in our country," he said. "They are good investors and they are sharp investors."

A similar arrangement has proved successful in Britain, having been set up in 2011 with 2.5 billion pounds of funding by the UK's five biggest banks. It has so far invested more than 1 billion pounds in over 160 companies and was the seventh-busiest private investor in the world in 2016, based on deals completed.

The Canadian fund will invest in companies that are looking to scale up, which firms and experts have said can be a challenge.

"Canada's very good at start-ups; our challenge is in growing them to a certain size," said Hendrik Brakel, senior director for economic, financial and tax policy at the Canadian Chamber of Commerce, which represents Canadian businesses.

The funds will take minority stakes in companies across different sectors, with typical investments ranging between $3 million and $20 million per company. Businesses will also have access to a mentorship network.

RBC Chief Executive Dave McKay said the fund will meet a demand by smaller businesses for "patient capital," investing in companies for several years to help them weather short-term economic headwinds and generate long-term growth.

"Most importantly, they're looking for support and advice and mentorship to help them navigate the growth challenges that so many companies face," he said.

The fund will be managed independently, with a board made up of independent directors and representatives from initial investors. It plans to have a leadership team in place to start deploying capital within the next year.

Finance Minister Bill Morneau welcomed the announcement, saying the initiative "will help ambitious Canadian companies get the capital they need to grow and succeed globally."

The move follows recommendations from Morneau's economic growth advisory council last month to create a private sector-led growth fund for companies.