The Small Business Ombudsman has called for a major bank to extend its support to small businesses in rural and regional areas affected by drought.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, has commended the changes that the National Australia Bank made to its agricultural lending policy this week, but has urged that the leniencies be extended to small businesses and rural industries that are also affected by drought.
Key changes announced this week by NAB include the ability for agribusinesses to offset their Farm Management Deposit (FMD) against their agricultural loans, as well as a default interest rate exemption for customers in drought-affected areas who get into loan arrears.
The major bank additionally expressed its support for FMDs being used as security for additional loans, but it noted that this would require legislative changes.
Commenting on NAB’s announcement, the ASBFEO said that she would like to see other banks follow suit, and for NAB’s support for agribusinesses be extended to other SMEs and rural industries that are also suffering the effects of drought and should therefore “be offered some reprieve by the banks”.
“The economic and mental stress of Australia’s farming communities battling to operate during a drought is enormous,” Ms Carnell said.
“Rural industries supporting farmers and country townships also get caught up in the downward spiral during a drought and other crises such as bushfires and floods. Too many are left having to solely rely on family, friends and the broader community during these hard times.”
The Ombudsman additionally urged that banks “stand by rural communities when they are doing it tough and build relationships that support economic growth in good and bad times”.
Ms Carnell concluded: “We are optimistically viewing the NAB announcement as a much-needed change in bank culture and hope other banks might take a long hard look at themselves and follow suit.”
NAB’s announcement was similarly welcomed by Federal Agriculture Minister David Littleproud, who praised the major bank for “having a social conscience”.
“If you’re a farmer whose bank doesn’t offer an FMD offset, you can tell them to bugger off because there are banks now which do,” the minister said.
He noted that prior to NAB, only Rural Bank, owned by Bendigo and Adelaide Bank, had offered customers the ability to use their FMD to offset against their loan.
Mr Littleproud commended NAB for removing penalty interest when customers default on repayments during periods of drought, but urged for a broader industry reassessment of penalty interests. He insisted that banks have the opportunity to “win back some social licence” by revising such charges.
“It’s also an opportunity for the banking sector to reassess penalty interest as a whole because I don’t think the charge truly reflects the cost to the bank. It’s really a kick in the guts when someone’s down, which isn’t the Australian way,” the minister said.
In his remarks about NAB’s policy changes, Mr Littleproud also questioned Rabobank’s commitment to Australia’s agricultural industry, saying that the “foreign-owned” bank “turned up its nose at Aussie farmers, ruling out an FMD offset product”. The agribank made its first appearance during the fourth round of royal commission hearings, admitting that its actions towards a Queensland-based cattle-grazing family were unfair and fell below community standards and expectations.
“I congratulate NAB boss Andrew Thorburn for acknowledging the banks have had issues in rural Australia and stepping up to lead,” the minister said.
Tas Bindi is the features editor for The Adviser magazine. She writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.
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