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Access to finance a major barrier to SME exporters

16 June, 2010

The Australian Chamber of Commerce and Industry has renewed calls for Australia's banks to make a greater effort to understand and meet the needs of the small business sector following the release of the Export and Investment Corporation's (EFIC's) Global Readiness Index (GRI).

The latest GRI highlights the continuing difficulties faced by Australian businesses seeking to export and identifies the chronic difficulty in accessing bank finance as a key barrier to small and medium businesses expanding their businesses overseas.

"Australia's banks should step up and champion the small business sector as it recovers from the global financial crisis (GFC)," said Peter Anderson, Chief Executive of the Australian Chamber of Commerce and Industry.

"Given the cost pressures on SMEs, including higher wage and labour costs; interest rate rises and higher bank fees; accessible finance for export oriented small and medium businesses is essential. This is just the moment when SME's need reasonable, responsive and responsible partners in the finance sector."

The GRI assesses the drivers, destinations and obstacles encountered by Australian businesses seeking to export. Of the nearly 1000 businesses surveyed, more than half (58%) nominated poor access to finance as a key barrier to expanding their business. EFIC found that access to bank finance was particularly difficult for small and medium businesses. 

Chronic difficulties accessing affordable bank finance and a fair risk assessment process has been found by ACCI to be the most substantial issue affecting day to day business in the SME sector. ACCI has made recommendations to the Senate Economics Committee Inquiry into small business access to finance on this very issue.

Despite industry calls for greater competition in the small to medium finance market, this competition has not been forthcoming. In addition, despite Australian banks ability to do so, they have failed to exempt trade finance products from the strict capital requirements under the Basel II Framework.

With Australian businesses offshore investments contributing 1.5 % to GDP, the successful globalisation of Australian businesses offers an important opportunity to further contribute to Australia's economy. The absence of additional funding for the Export Market Development Grants Scheme (EMDG) in the May Budget, despite shortfalls in pay-out amounts, has put further pressure on exporting businesses.

EFIC's Global Readiness Index is a wake-up call Australia's banks that their SME customers can only contribute to domestic and global recovery if the finance sector becomes a more accommodating and supportive partner.

Source: Australian Chamber of Commerce and Industry

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