Banking and finance has come under renewed focus in this country following the federal government’s announcement late last year of a Royal Commission into the banking sector.
Prime Minister Malcolm Turnbull and Treasurer Scott Morrison announced the royal commission would look into the “alleged misconduct of Australia’s banks and other financial services entities”.
“All Australians have the right to be treated honestly and fairly in their dealings with banking, superannuation and financial services providers. The highest standards of conduct are critical to the good governance and corporate culture of those providers,” Turnbull and Morrison said in their joint statement.
While the commission is to be welcomed, from the perspective of female entrepreneurs and small business owners, it is doubtful we’ll be seeing some of the more systemic problems of bias being addressed. It has already been noted by some that the terms of reference for the commission ensure we will not see any substantial shake-up to the status quo.
What the government seems to be aiming for with the commission is to give the banking and finance industry a clean bill of health in the wake of a number of scandals that have rocked consumer confidence in banks. The onus here seems to be very much about giving the banks a chance to show some public contrition for mistakes and maybe accept a few recommendations from the final report as a show of good faith.
The joint statement from Turnbull and Morrison makes this fairly clear: “Ongoing speculation and fear-mongering about a banking inquiry or royal commission is disruptive and risks undermining the reputation of Australia’s world-class financial system. The government has decided to establish this royal commission to further ensure our financial system is working efficiently and effectively.”
There’s certainly an element of arse-covering about it all. However, as the Australian Small Business and Family Enterprise Ombudsman small business loans inquiry showed, banks have a lot of work to do if they want to win back the trust of small business owners.
The inquiry heard cases that demonstrated banks deliberately employed systematic, poor and unreasonable behaviour to terminate business loans, with little in the way of redress in such cases for small business owners. Ombudsman Kate Carnell has saidher office would be keen to make the royal commission aware of these cases and others that showed unfair treatment of small businesses.
“I hope the royal commission probes these past cases and recommends compensation for those who were unfairly treated,” she said.
A recent survey of female entrepreneurs conducted by The Female Social Network* has reiterated the problematic relationship at the moment between banks and small business people.
The Women, Money, Business and Banking survey asked just over 200 women what they thought about their dealings with banks and the results were not great. One of the main findings was that for women starting up a business, securing money from banks was a mountain few could climb, with 54% of those surveyed saying they had gone to family and friends or savings to fund their business, while only around 15% had been able to get a secured loan from a bank. This was even more pertinent for women who had no property they could secure against a bank loan.
“Unless female entrepreneurs receive grants they are left asking family and friends or using credit cards,” said one respondent. And let’s face it, not very many people can tap the bank of mum and dad for thousands of dollars at a time. And the perils of credit card debts for fledgling small businesses are well known.
On the issue of gender bias, female entrepreneurs still thought banks saw them as either trivial or high risk. The tone of many responses was summed up by this comment: “They could not see the value or potential of my business.”
So even if banks did their best to overcome obviously prejudicial behaviour, they still found it hard to grasp the potential of women’s businesses. That’s a cultural issue the big banks are trying to address, but it is still very apparent to many female entrepreneurs.
Maybe the most damning figure for the banks was that 59% of those surveyed said that they had “experienced an overall negative attitude from banks towards female business owners.” That is a very high number of women who are walking out of banks feeling dispirited and disillusioned. Is that the way banks want to be courting female entrepreneurs and small businesses in general?
The royal commission might yet surprise us, but banks need to start listening more closely to what small business owners, and women especially, are saying. Only then might we start to see a fairer banking system that unlocks the massive potential of small businesses and female entrepreneurs in this country. That would be a win-win for all concerned.