RBA data confirms not much has changed on SME lending

  • By Christine St Anne

Despite a number of policy measures to support business lending, the latest data from the Reserve Bank has revealed that little has changes since the pandemic. 

In a speech to the Australian Financial Markets Association, RBA head of domestic markets Marion Kohler outlined key findings under the central bank’s new financial data collection – the Economic and Financial Statistics collection, or EFS for short – and its value to the central bank  “during this turbulent time”. 

Looking at the EFS numbers, Kohler assessed how the policy measures are flowing through to business credit. 

According to Kohler, the EFS collection gives the bank better statistics on the provision of finance to businesses. 

“We now have a more comprehensive measure of credit outstanding by business size. 

“The reported level of banks' business lending is higher as a result,” she said. 

The graph below shows these new business lending data by business size. 

“Using the EFS data we know that large businesses drew on lines of credit in March and April and held these funds as deposits. 

“Some of this was drawn for precautionary purposes, and about three quarters has since been repaid – as highlighted in the red top line.  

As noted in the graph, the volume of lending to SMEs has been little changed since the onset of the pandemic. 

“This could reflect a lack of demand for new loans, due to the heightened uncertainty for many small businesses in the current environment,” Kohler said.

“Some businesses may be reluctant to take on new debt, as this uncertainty affects their expectation of future revenue and so their ability to repay debt. 

“But banks are also more cautious about lending to businesses. 

“In particular, to new businesses and to businesses in those sectors most affected by the pandemic.” 

RBA’s Kohler acknowledged that there are also a number of initiatives helping SMEs including the JobKeeper program and the Boosting Cash Flow for Employers program. 

Both banks and landlords have also offered support such as loan deferrals and rent reductions. 

“These initiatives have probably lessened the need for bank credit.” 

She also noted that lenders can access additional funding under the Reserve Bank's Term Funding Facility if they expand their business credit, particularly to SMEs. 

To date, banks have dawn $52 billion under the TFF. 

The initiative was recently expanded and the RBA expects and the bank expects further drawings over the coming weeks particularly by the larger banks to support lending to businesses.