Big banks snub Morrison’s $1 billion small business fund

Prime Minister Scott Morrison’s $1 billion Business Growth Fund was supposed to be a boon to Australian small businesses. But it appears some of the major banks and superannuation funds are less than eager to throw their support behind the initiative.

Among the big banks, only NAB has come on board, agreeing to match the government’s initial $100 million investment.

HSBC has also pledged its support, encouraged by the success of similar ventures in the UK and Canada.

But the response from a majority of Australia’s largest financial institutions has been tepid. Westpac, ANZ and Macquarie Bank have all declined to join, leaving the initiative’s future without solid footing.

Commonwealth Bank and AMP, meanwhile, remain on the fence, and will decide whether or not they will commit once details about the fund and the direction it will take have been fleshed out.

What is the Business Growth Fund?

The Business Growth Fund was formally announced by the PM on Tuesday, but the idea has been in the works since November of last year.

The fund hopes to see the government partnering with big banks and super funds to provide long-term equity capital to a variety of Australian small businesses.

The government will seed the fund with an initial $100 million, which it hopes to grow to $1 billion with the help of major players in the Australian financial sector.

“All of this is designed to produce another 250,000 new small and family businesses over the next five years,” said Morrison on Tuesday.

The fund will take its cues from the UK’s own Business Growth Fund, which has invested more than $2.5 billion since its inception in 2011.

What happens next?

Despite the less than stellar reception, Morrison remains optimistic that support for the initiative will grow as the government reaches out to more banks.

As for the banks that have expressly declined, Small Business and Family Enterprise Ombudsman, Kate Carnell, has urged them to reconsider.

“Similar models in the UK and Canada are tried and tested; addressing barriers to accessing affordable capital for businesses that have gone on to demonstrate successful growth,” she said.

“We also support modification of Australian Prudential Regulation Authority (APRA) regulations to set an appropriate risk weighting to make it a viable proposition for private sector investment.”

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