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Manaaki co-founder Andy Hamilton highlights areas where SMEs could use assistance during the COVID-19 crisis and beyond

Manaaki co-founder Andy Hamilton highlights areas where SMEs could use assistance during the COVID-19 crisis and beyond

By Gareth Vaughan

The operating model pursued by the country's major banks isn't working for New Zealand at the moment, at least not for our small and medium sized businesses, Andy Hamilton says.

Hamilton, co-founder at small business support forum Manaaki and former CEO of The Icehouse, says the COVID-19 crisis has exposed a series of issues with the banking system for SMEs.

"I don't think the banks are bad. I just think the operating model is not optimal for New Zealand right now," Hamilton says.

Banks have been "amazing" towards SMEs, or small and medium sized enterprises, that had existing bank facilities going into the crisis. The problem has been for SMEs that didn't have an existing banking facility when the COVID-19 pandemic hit, Hamilton says.

"if you're part of that SME world that doesn't have an existing facility coming into COVID, they [bank] are just really not set up to take on that sort of risk. So that has been a really big challenge. I think the other big challenge is the banks weren't equipped for the mass volume demand that came from customers. And that's because they lack digital origination, scoring and fulfilment. So there is a big need, I think, to have better digital processes in our banks."

Hamilton says the danger for some businesses is if they don't get access to funding they will die. And he says he understands the counter argument that maybe they should go out of business.

"I don't have the answer to this question around risk because I understand why the banks are not lending to so many SMEs, because of the inherent risk that sits there," says Hamilton.

"I think that's just a very hard situation. Would I like to see a more aligned partnership with the banks and government? yes." 

"You've just got to look at the IRD cashflow loans scheme, what is it? Half a billion [dollars] has gone out the door already to 38,000 businesses. That could've been done by the banks if we had a better relationship between the government and the banks," says Hamilton.

(By 4pm Tuesday IRD says loans approved and disbursed under the Small Business Cashflow (Loan) Scheme totalled just under $698 million to 40,280 applicants, with the average dollar value of loans approved $17,326).

"I [also] think we need to see more digital competence in the banks, I think we need to see more competition, and more opportunity for alternative funding vehicles to come into the market. I'd love to see a small business funding marketplace...I think we should be legislating for open banking, I think the banks want more certainly around open banking," Hamilton says.

Asked whether he thought the government should regulate retail payments, a significant cost for SMEs and an issue recently probed at length, Hamilton says he believes New Zealand has a pricing and margin issue.

"It's just the structure of a long thin country that has a lack of competitive elements. And I think we do need to be harder on pricing and harder on margins that certain businesses are allowed. The energy companies is another one. I don't know whether the pricing is fair in banking or in energy. I would like to know that someone would look at that and go 'actually that's not a fair price'," Hamilton says. 

"I think there should be stronger pricing regulation in New Zealand, same with the building industry."

On Tuesday Grant Robertson, Stuart Nash and Kris Faafoi, the Ministers of Finance, Small Business, Commerce and Consumer Affairs, announced they've written to more than 40 significant enterprises and banking industry representatives to request they join efforts to support SMEs.

“We want 95% of invoices paid within 10 working days. Once the impact of COVID-19 arrived on our shores we directed all government agencies to bring forward the prompt payment target with immediate effect. Improving payment terms is a priority. Paying suppliers faster is an important way to unlock cash-flow and productivity benefits, which supports ongoing business sustainability and growth," Robertson says.

Hamilton welcomes this. He argues that with data and digital technology these days big companies can pay smaller suppliers promptly and hopes they don't revert to paying on the 30th of the following month once the crisis recedes.

"Just to get this economy going large can look after small and that's all about social licence. So I hope the government doesn't have to legislate, but I think if they don't see evidence that this is happening then they will legislate," says Hamilton.

"An interesting challenge would be would government legislate for a greater proportion of their contracts to be local producers? That's a very challenging area that I'd love to see some progress on as well."

Hamilton says more than 50,000 people have visited the Manaaki website in about a month, asking about 500 questions. Of these about 100 have been about online, digital and social media issues.

"Sometimes it's quite opaque to find out how you as a business owner can learn about Facebook, or learn about Instagram. So I think how we make those tools more accessible is a really important thing," Hamilton says.

"Putting a website up is not a hard thing these days. Building a community around your website, understanding the Facebook algorithms, the Google SEO, that is actually quite challenging."

He would like to see work by the private sector and government to "help small businesses digitise in a way that is way more effective."

*This is the tenth interview in a series looking at reactions to and potential policy responses to the coronavirus pandemic and evolving economic downturn.

The first interview, with staunch critic of the economic mainstream Steve Keen, is here. 
The second interview, with director at economic advisory firm Landfall Strategy Group David Skilling, is here. 
The third interview, with Motu and Victoria University's Arthur Grimes, is here. 
The fourth interview, 
with Patrick Watson, senor economic analyst at Mauldin Economics, is here.
The fifth interview, with Climate Change Commission Chairman Rod Carr, is here.
The sixth interview, with Director of the Centre for Sustainability at the University of Otago Janet Stephenson, is here.
The seventh interview, with Frank Jasper, chief investment officer at Fisher Funds, is here.
The eighth interview, with strategy and risk consultant Raf Manji, is here
The ninth interview, with Professor of Mechanical Engineering at the University of Canterbury Susan Krumdieck, is here.

*This article was first published in our email for paying subscribers. See here for more details and how to subscribe.

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We need more “INCLUSIVE ECONOMY” in ways of really helping people in need during this tough times - from their hearts, not just saying “ A century’s opportunity “ (to lure more investors to buy more houses) by our bank’s Chiefs. A memo from world’s largest bank CEO’s WAKE UP CALL.



These overseas banksters never worked for the community or small business owners, and will only do it when forced to. Their objectives have been for short term profit maximisation and executive bonuses.

Whats even worst is our past politicians (Jonkey, Simon Power, Shipley, Brash, Douglas, etc) aid and abated them; ending up with cushy bank jobs (and who knows what else). I'd personally undertake the highest level of enquiry in the land on this, however as we have seen with the winebox enquiry, this lot appear to be above the law.

NZ inc had a sustainable model prior to Roger Douglas, with community owned banks where the profits stayed local. Remember the Trustbanks, which were absorbed by Westpac. Postbank absorbed by ANZ, BNZ absorbed by NAB (even though NZ inc kept the bad loans). The list goes on, and I hope the politicians involved in this clear out rot in hell.

What a load of o rubbish from Left field

Where's the rubbish Imhenry? Its all fact. Perhaps explain.

Nothing left about me, just advocating sustainable capitalism rather than crony capitalism; if you know the difference.


The fallacy of Low Interest rates.
The lower they go, the less banks will lend ( Why would they! The risk component embedded in the price of money has been artificially removed).
All we are doing is lumping risk onto the Public Balance Sheet - one way or another, and banks will stand back, and watch.

I think we're now in a liquidity trap - not sure what its going to take to get us out of it though...something big.

Yes it's almost a textbook liquidity trap. Central banks are keeping a lid on bond yields by buying them up, but you'd have to say all the other criteria are met.

Yes I think monetary policy is no longer going to be effective. We can sprinkle QE around but if we have mass unemployment and can't turn the additional dollars into earnings (via products/services) then we might see a rise in inflation. Then what do central banks do? Raise interest rates? Well they might have to stop inflation getting out of hand, but that would destroy a lot of businesses and families - there would be more debt defaults.

Not a pretty picture that one!

Indeed. Central banks have painted themselves into a corner. First mover to hit the exit on bad debt will cause a tsunami effect, but probably be better off than those that follow.

"the less banks will lend ( Why would they!"

Regulations currently prohibit banks lending to just anybody, unlike governments they aren't allowed to pretend risk does not exist.

Removing risk from banking was a major causal foundation for the GFC.

"unlike governments they aren't allowed to pretend risk does not exist."

Then why the f-k do we have a giant housing bubble Ralph?

Er - land prices caused by stoopid Local Gubmints and their restrictive Plans? Everyone seems to agree about That, but remedies short of going Postal on the Planning Floor seem to be Thin on the Ground - or Land......

You don't have to remove risk management to achieve an asset bubble.

But if you do remove risk management from the finance industry it eventually creates a massive economic risk of explosion. Pretending risk doesn't exist is always a political construct as nobody else is stupid enough to do it.

Why still higher credit card interest rates ha?
Why BNZ and State owned kiwi bank removed 0% balance transfer rates ATM

There has been an increase in unemployment that will fall outside many banks risk models. Now one wants to be the one holding the parcel now the music has stopped.

What is Hamilton talking about? Building strong SME business has not been the main focus of banks. It's been fuelling housing speculation. The economy has not been built around business driving house prices as a kind of cherry on top of the cake. It's the other way around. The housing bubble has driven consumer spending through the wealth effect which benefits SMEs. The sooner people understand the narrative correctly, the better.

As I've said a few times JC, I really started to think we were getting in trouble when I was seeing the young Mums in their 20's and 30's doing the school and shopping runs in their late model RangeRovers (around Albany)...assuming they purchased those with gains from property or more idea. That was a few years back. Wonder if their partners still have jobs.

Or the partners are with them? Excuse the pun, but with this lot cashflow is key.

Unfair pricing in banking (and energy).. yes i would agree the risks are higher in lending to business, some of them will fail.. Maybe the IRD could buy shares in a company as opposed to loaning to them? Then the gains and losses may even out and business would not be burdened with more monthly costs.

Some thoughts:

1. Managing retail banking through the IRD is a regulatory and practical disaster waiting to happen.

2. The regulatory construct for banking is created by government and not banks, so he is criticising the wrong party.

3. Competition in banking is also created by government because nobody else can grant a banking license.

4. His solution to what he claims are poor regulation is more regulation, by price fixing banking margins. Goodness knows what the compliance costs of that would be. Unfortunately for him, price fixing creates product shortages and poorer quality products. So it’s hard to see how price fixing could possibly fix the problem of credit availability.

People proposing that regulatory failures can be fixed by even more regulations are caught in Einstein's observation that, "We cannot solve our problems with the same thinking we used when we created them'"

And good thoughts, too.

Whats your solution then to the debt, which seems to have (temporarily) benefited the few at the expense of the masses?

If you cant think of one yourself, try this for size.

Only allow banks to lend locally the same amount of local deposits held. Thus allowing the local economy to grow at level the local can support. So simple really, unless you're sold your banks to offshore interests. Then politics takes over, until the masses take it back.

Banks aren't really the right vehicles for these very sub-prime loans, the regulatory environment they operate within to too narrow. Small businesses need a peer to peer market so they can find a fair price. However many small businesses will have to come to understand that the reason they cannot access credit is that they have fundamental solvency issues.

Indeed. I suspect many run their operations on the basis of an occasional look at the bank account. But, and of course, it's perfectly possible to have $100K in the bank and be insolvent: the owner might have neglected to pay IRD some GST and PAYE and thus owe them $120K....

But, human nature and all that, the owner may well still be eyeing up that sleek Boat....a bargain at $35K....and thinking - that leaves $65K....and picking up the phone....