Bias towards home lending hurts SMEs
The bias of the Australian banking system towards home lending could prove detrimental to the financial system and economy, according to the National Australia Bank's group executive for business banking, Joseph Healy.
In his speech to the American Chamber of Commerce luncheon in Sydney, Healy noted small to medium-sized businesses (SMEs) are the most productive area of the Australian economy, yet SMEs have real concerns about their access to bank lending.
“The reality is that during the global financial crisis business lending did decline, in part due to demand, in part, evidence would suggest, due to difficulties accessing credit,” Healy said.
Home lending grew from 43 to 57 per cent in the last decade, whereas business lending in the same period fell from 46 to 35 per cent.
Peter Strong from the Council of Small Business of Australia (COSBOA) said the impact of the decline in business lending could be detrimental to the Australian economy.
“Australia would not be able to take opportunities as quickly as it [did] in the past. Small businesses react to new opportunities much quicker than big business, and holding back finance is what’s stopping us from growing,” Strong said.
“Small businesses employ the largest number of Australians and major job losses can be caused by the failure of SMEs,” he added.
Strong said the solution to this problem is the introduction of portable accounts, which would free up competition.
“Banks should also get rid of their hegemonic attitude and realise small business lending has lower risks than big business,” he added.
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