One of Australia’s Big Four banks recently made headlines, as it announced that it was ready to shell out $1 billion, in order to support the country’s fledgling start-up segment. Start-ups have been heralded as the global savior of a recovering economy and Australia wants to jump on this wagon, too, since small and medium locally owned businesses can literally breathe new life into several key performance indicators of the economy, from employment levels, to consumer confidence and infrastructure – not to mention tax collection. This announcement, made by the head of the bank’s small business branch, follows two recently released sets of data: one which points to Australia’s drop in ranking for IT literacy, and another, which indicates that SMEs Down Under have a hard time accessing financing.
English: Reserve Bank of Australia located on London Circuit in Canberra, Australian Capital Territory. (Photo credit: Wikipedia)
The announcement above does, indeed, read like a commendable initiative, but it shouldn’t be solely perceived as an act of kindness and generosity from the bank. It’s also worth bearing in mind that, while Australia’s Big Four banks control over 90 per cent of its mortgage market, they are having trouble luring in new business for their personal loan and home loan operations. It’s no longer news for anyone remotely interested in Australia’s banking sector that it, too, is suffering some after-effects of the global financial crisis. The country’s central bank has tried to stimulate personal and home loans, by repeatedly cutting the official cash rate – and implicitly lowering the interest rates on loans.
While not all banks rushed to enforce the cuts in full, some banks, such as Bankwest, are still competitive in the personal loans sector, by also branching out into the online loans segment. We checked out rates at http://www.bankwest.com.au/personal/personal-loans/personal-loans-overview and found that online loans are somewhat more competitive than regular ones at the moment. That being said, it’s unlikely that the personal loan segment of the banking industry will return to its pre-recession levels any time soon, or that it will see a two-digit growth ratio in the near future. As such, all four of the country’s major banks have started to look elsewhere for sources of development.
All four big banks have chosen to branch out into Asian territories, almost in spite of the Reserve Bank of Australia’s warning against too much enthusiasm when it comes to these relatively unchartered realms. While Asia has seen some economic development in the past couple of years, it, too, has been dealing with a slowdown in development. One bank has lent $60 million to a short-term and payday loan provider, signaling a move to this more dynamic segment of the lending market, which stands to yield profit almost immediately. Last, but certainly not least, banks are looking at start-ups for their ray of hope, when it comes to liquidities.
The bank which promised the $1 billion infusion announced their intentions right after a poll, which questioned some 12,000 adult Australians, revealed that 39 per cent of start-up owners had faced trouble accessing credits from banks. The survey, which looked at the October – November, 2012, interval, also found that 69 per cent of small new business owners decided to reduce their personal expenses, in favor of supplying their business venture with cash, whenever it happened to be low. Meanwhile, the bank’s small business GM stated his institution was well aware of the trouble that getting a business up and running can pose to the owners, within the first year of a start-up’s existence. Their intentions, the GM explained, was to help as many Aussies as possible make their “business dreams” come true. He also cited the bank’s approval rate for small business loans, which stood at 7 out of 10 for 2012. Whether or not they will actually make good on their generous pledge – and reap its expected results, of increased, liquidities, time alone will tell.
