ASB has lent only NZ$27 million from a NZ$1 billion 'Jobs Creation' fund it set up in February, with a lack of applications leading it to announce changes to the scheme in an attempt to make it more attractive to businesses. The changes are in part to make the fund look more attractive to exporters, ASB said, as they play a lead role in the recovery of the New Zealand economy.

The fund was set up ahead of the government's jobs summit in February as a vehicle to lend to businesses which could demonstrate a loan from the fund would create jobs, or prevent existing jobs from being lost. However, with such a low level of uptake over the previous six months, ASB has expanded the loan options, intoducing the option of a 4.75% floating interest rate for loans.

The fixed rate option for loans is now at 5.75%, after initially starting at 5%. Loan rates will apply for two year terms, and the floating rate will remain at 1% below ASB's variable housing rate for that time.

These rates are well below regular business lending rates. Reserve Bank of New Zealand figures show banks' weighted aggregate business base lending rate was 9.86% in August.

ASB Chief Executive of Relationship Banking, James Mitchell, said that so far ASB had lent just over NZ$27 million from the fund, which is just 2.7% of the available funds. This was "very low" from what had been expected, hence the changes made today. So far, ASB had made 70 loans to companies which had created or saved just over 540 jobs, Mitchell said.

Applications to the fund had also remained low, with a lack of enquiries that went through to actual applications. Mitchell said that if every company that applied had met the scheme's requirements, ASB would have lent "perhaps another NZ$20 million" from the fund.

ASB said it had now specifically reserved NZ$250 million of the fund to lend to exporters, with options available for foreign currency funding. Of the 70 firms ASB had lent to, these were "not largely exporting companies," Mitchell said, "so we're doing this to broaden the appeal."

"Exporters play a lead role in the recovery of our economy, and these low interest loans can offer some relief against a high New Zealand dollar," he said. "Setting aside NZ$250 million of the loan fund for exporters is one way we can support their businesses during these difficult times."

The application cap of NZ$10 million per loan remains in place to stop the fund being consumed by large businesses, such as Fonterra, with large balance sheets, Mitchell said. The minimum loan amount is NZ$100,000.

"We want to lend the money," Mitchell said. "We copped a bit of criticism in the media when we launched it, with our competitors saying it was a gimmick to gain headlines, but it is a genuine inititative to help the economy."