An inquiry by the Parliamentary Joint Committee on Corporations and Financial Services on access to finance for small and medium business has found that while  SMEs do have access to finance,  it is on terms less favourable than prior to the global financial crisis.

 

The report found that the global financial crisis reduced the number of finance providers available to SMEs  and increased the cost of finance.  It concluded that better information about SMEs and about business finance could contribute to better policy processes and lending. The committee noted that there is “no coherent approach across government agencies or major stakeholders in defining different business categories.”

 

“A lack of standard definitions means a lack of standardised data. It can also lead to misunderstandings when interpreting that data. In listening to stakeholders, there appeared to be at times significantly diverging understandings of what was happening in the lending environment, with some data gaps.”

 

The Parliamentary Joint Committee on Corporations and Financial Services inquired into the availability and terms of finance for small and medium enterprises (SMEs) in Australia.

 

The committee considered the types of finance available to SMEs, the degree of competition in SME lending, and the impact of prudential regulation on the availability of finance.

 

Committee Chair, ALP backbencher Bernie Rippol,  said  that access for small and medium enterprises to finance on terms that are fair and reasonable is vital for the growth and productivity of the SME sector.

 

“As the main source of finance for SMEs, access to debt funding from lending institutions is essential." Mr Ripoll said.

 

The committee recommends that the Government assess the value of developing uniform definitions of 'micro', 'small' and 'medium' business to be applied for data gathering, policy development and analysis by Commonwealth and state agencies.

 

The committee also recommended:

  • the Reserve Bank of Australia specifically track the impact of the introduction of Basel III on the cost of small and medium business finance and residential mortgages
  • the Code of Banking Practice and the Mutual Banking Code of Practice be amended to include a standardised notice period for notifying business borrowers of changes to loan terms and conditions that may be materially adverse for them, and
  • the government undertake further work to explore policy measures which may strengthen the mutual sector as a 'fifth pillar' of the banking system and thereby promote competition.

 

The committee's report is available at: http://www.aph.gov.au/Senate/committee/corporations_ctte/sme_finance/index.htm