The Federal Government’s $4 billion injection into the securitisation market will have a limited but positive impact on the small business sector, according to industry experts.
As part of the Government’s banking reform package, $4 billion will be poured into the residential mortgage-backed securities market, allowing smaller lenders improved access to credit.
The government will also allow banks, credit unions and building societies to issue covered bonds in a bid to encourage more of Australia’s superannuation pools to flow back into the credit market.
Martin McGrath, financial services partner at KPMG, says $4 billion is not a huge sum but will have a positive impact as it will kick-start the securitisation market again.
“[This reform aspect is] more directly related to mortgage lending but it does provide funding nonetheless. Organisations that take advantage of that funding will perhaps have the appetite to lend to small businesses,” McGrath says.
“The fact that the banks can do covered bonds is another, potentially cheaper source of funding. Even for the major banks, cheaper funding will create a greater opportunity to lend at slightly cheaper rates to small businesses.”
“However, banks are still conscious of high-risk lending, which is something small businesses need to keep in mind.”
An ANZ spokesperson says the bank supports measures to increase competition without imposing significant additional costs on banks and their customers.
Although it would not comment specifically on the small business sector, ANZ welcomes measures to support liquidity and confidence in the securitisation market, and the diversification of bank funding through initiatives such as covered bonds.
Mike Hirst, managing director of Bendigo and Adelaide Bank, says the reform package is an “important first step” towards increasing competition in the sector.
“These measures will grow the available pool of funds, which should lower the cost of funding and ultimately produce more competitive pricing for consumers,” Hirst says.
“But competition is not just about cheaper prices. It is just as important that communities and consumers right across Australia have access to banking services that directly support them.”
Peter Strong, executive director of Australia’s Small Business Council, says small business owners should have the same rights as any other individual in the community in terms of access to finance.
“We do not want loans to be made available for enterprises that are considered risky but we do want people who use their home as security to be given the same treatment as any other person who uses their home to support a loan,” he says.