Greater emphasis put on non-financial factors
Kiwibank has disrupted traditional banking rules, to help break down some of the barriers facing Māori startups and small businesses seeking capital to grow.
This move highlighted the need for the banking sector to do better in helping grow the Māori economy, which is valued at $69 billion, but lags behind the broader New Zealand economy as a whole.
Teaho Pihama (pictured above left), head of Māori advisory at Kiwibank, said the way banks lend to businesses has always had a disproportionately negative impact on Māori startups and SMEs looking to secure funding from banks.
“Banks have always applied a one-size-fits-all risk approach which typically requires the business owner or owners to provide their residential home as security over the business loan,” Pihama said. “This has an unintended negative impact on Māori because they are statistically less likely to own their own home, or the land they own is communally held and harder for banks to lend against.”
He said these challenges make it all too easy for banks to decide that it’s too risky to lend, consequently making it “harder for Māori businesses to achieve their true potential and contribute as much as they can to Aotearoa’s broader economic growth.”
To respond to these challenges, Kiwibank has reworked the way it assesses a company’s historical performance.
“We look at non-financial factors, such as experience, expertise, and customer loyalty, as well as financial factors like revenue and cash flow,” Pihama said.
Importantly, for smaller sums of lending, the New Zealand-owned bank has scrapped the requirement that loans needed to be secured against a business owner’s personal property.
One customer who has benefitted from Kiwibank’s new lending criteria is Solartive, a Whangārei solar panel company.
Ella Te Huia-Phillips, director of Solartive, launched the company after she noticed the need for solar power in rural Te Tai Tokerau/Northland communities. Huia-Phillips also approached other banks to source the funding to establish the company, but it was Kiwibank that offered her with more flexible terms, hence her decision to turn to Kiwibank for her funding needs.
“Kiwibank were amazing to deal with,” she said. “I had one person who helped me through the whole process which made it simple and easy. And it is awesome to know I was dealing with a New Zealand-owned bank. The funding has helped us stay in business, helps with cash flow, inventory and with the overall growth of our business.”
In a media release, Joanna Greaves (pictured above right), Kiwibank general manager of business banking, said they rolled out the initiative in a bid to address some of the challenges unique to Māori and the changes will benefit all startup and young businesses in need of funding to achieve their growth ambitions.
“One of the great things about this mahi is that it enables Māori and non-Māori businesses to grow and thrive, delivering on our purpose of making Kiwi better off,” Greaves said. “Small businesses contribute a huge amount to the New Zealand economy, so the more we can do to support them, the better off we all are as a result.”
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