Since the COVID-19 pandemic struck, New Zealand’s main banks have been given access to a range of tools allowing them to keep lending large amounts of cash at low interest rates - however, KPMG banking and finance manager John Kensington says the same support has not been provided to the alternative lending, or non-bank sector.
Addressing members of the Financial Services Federation, Kensington said that although the non-bank sector may look relatively small against the broader lending landscape, the services it offers are often crucial to clients who can’t obtain lending from the main banks.
Read more: Non-bank boosts NZ presence
“There’s a very real feeling that the tools and support provided to the banks, who might be 95% of the sector, haven’t been extended to this sector - and that’s actually quite glaring,” Kensington said.
“This sector plays a very important role, and it hasn’t had the support given to it that the main banks have.”
“The argument has been ‘well, it’s a small part of the market’ - and it might be numerically, but it isn’t in terms of the number of customers to deal with,” he explained.
“The things that alternative lenders do, many of the main banks won’t do. They’re not just 5% of the picture - they’re 100% of that 5% of financing that they provide. I think that’s something that needs to be better understood.”
Kensington noted the ease with which main banks can offer additional lending to clients who are struggling with cash - an area in which alternative lenders have so far received little support.
Read more: First Mortgage Trust hits $1bn funds under management
“Say a client has several vans, a group of staff and a house with a mortgage on it, with financing on the vans provided by non-banks,” Kensington said.
“The banks are probably encouraging that client to borrow more on the house, which is part of a bubble, because the banks have money to give away. Alternative lenders haven’t been given the same tools, and yet the financing that goes across those vans are critical to people’s wages and mortgages.
“That kind of scenario really shows you where the disconnect is.”