Launched amid much fanfare 19 months ago, almost 90% of ASB's NZ$1 bln Job Creation Fund remains untapped
Hard-up businesses are still able to call on nearly 90% of ASB's NZ$1 billion Job Creation Fund, nearly 19 months after it's launch made front-page news.
Launched amid much fanfare in February last year, just before Prime Minister John Key's Jobs Summit at the height of the Global Financial Crisis, the fund has lent just NZ$107 million.
Stewart McRobie, ASB's chief executive of relationship banking, told interest.co.nz the NZ$107 million had been lent to 166 businesses, along with NZ$30 million in associated lending. Those taking out the loans had been both new and existing ASB customers from varied sectors and industries.
McRobie said the fund, which at launch ASB said was designed to create employment or prevent people losing their jobs, had helped create, or retain, more than 1,200 jobs.
He said one reason for the low uptake was because over the past two years many businesses had focussed on consolidating debt and deleveraging rather than increasing borrowing.
"Additionally, many of our loans have been to smaller businesses with relatively low borrowing requirements. The loan pool was set up to accommodate every eventuality, and remains open to businesses creating or retaining jobs for New Zealanders," he said.
Business lending falling
The revelation of the low take up of the ASB fund comes with industry wide bank lending to businesses in the doldrums. The Reserve Bank's most recent monthly statistics, for July, show at the end of that month total business borrowing stood at NZ$72.2 billion, down 7.4% year-on-year. And PricewaterhouseCoopers' recently released third New Zealand Banking Perspectives Report noted a “dramatic” 6% decrease in business lending in the six months to March.
In an attempt to kick start business lending, BNZ says it recently eased lending criteria to small businesses and is now approving more than 65% of loan applications from small businesses when it was previously declining about 65%. And Westpac chief financial officer Richard Jamieson told interest.co.nz last week his bank had grown business lending by about NZ$400 million in the year to September compared to an overall industry wide decline in business lending of about NZ$5.5 billion.
ASB is offering Job Creation loans at 5.70% per annum, fixed for two years. Borrowers must meet the bank's normal business lending criteria as well as demonstrate the employment benefits of their proposal.
Most applications have generally met the criteria, indicating a real need for the initiative, McRobie said. After two years Job Creation Loans realign to market rates.
'Talk to us'
With under six months to go before the fund's first customers reach the two year mark, McRobie said businesses still struggling should talk to the bank.
"We would expect our customers to shift to market interest rates at the end of the two year initial term. However, if there is financial hardship we will work with them to explore their options, including ways to restructure their debt," he said.
There were a number of interest rate pricing options for businesses once their special interest period was over, McRobie said.
"We will work with each business to find the best rates for their circumstances."
McRobie said the vast majority of customers have met their financial commitments, despite the pressures businesses remain under as the economy emerges from the recession.
As the economy strengthened there had been a slow decline in the number of businesses applying for Job Creation Loans, but the fund would remain open for an indefinite period, McRobie said.
"We will continue to assist businesses in creating and keeping jobs for as long as our customers tell us this is needed," he said.
When it was announced on the eve of the Mark Weldon chaired Government Job Summit in February 2009, the fund drew praise from Key. ASB chief executive Charles Pink said at the time that if a business was prepared to invest in its future, and create or protect employment, then ASB was saying it was prepared to back them with an attractive lending rate.
James Mitchell, ASB's then head of relationship banking and financial services and now project manager of Pyne Gould Corporation, the Canterbury Building Society and Southern Cross Building Society's "Heartland Bank," said the fund wouldn't be dependent on ASB raising a matching amount through the term deposits.
"There are businesses with good plans and good ideas that need the impetus, given what we've seen with business and consumer confidence," Mitchell told interest.co.nz in February last year.
Acknowledging a year ago that the fund had lent only NZ$27 million, Mitchell said a lack of applications meant ASB was making changes to the scheme in an attempt to make it more attractive to businesses, especially exporters.
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