Ele Ludemann: Rural banking inquiry

The government has asked the Primary Production Select Committee to launch an inquiry in to rural banking:

. . . ACT MP and committee chair Mark Cameron says he look forward to discussing with members of his committee and the finance and expenditure committee the terms of reference for an inquiry.

He will also discuss holding joint meetings to hear evidence from submitters and preparing a report on rural banking to feed into an overall inquiry report on banking competition.

“I’ve heard from countless farmers about the disparity between rural and urban bank lending practices, and I have been working on this issue since I became chair last year. . .

One contribution to higher rural interest rates is the requirement for banks to hold more capital for lending to farmers than for urban mortgages.

One justification for that is volatile prices for primary produce which can lead to big losses.

How does that differ form the risk of people with mortgages on houses in town losing their jobs?

Prices for primary production do go down, but they always come up again.

But there’s more to concerns about rural banking than interest rates:

Rural Women New Zealand (RWNZ) is welcoming today’s announcement that there will be a full Parliamentary Select Committee inquiry into banking competition, focussing on rural banking.

“We know from our members that rural communities are experiencing a range of issues with their banks and that banks are not currently meeting their needs,” RWNZ CEO Gabrielle O’Brien says.

“The range of issues is broad and includes everything from constrained access to lending and high interest rates to the closure of rural bank branches and ATMs.

“Our members are also concerned there’s an over-reliance by banks on digital services as opposed to personal banking services which is leaving rural communities without adequate support. This is especially the case when some rural communities continue to experience poor connectivity,” Gabe says.

“With the food and fibre sector making up 10 per cent of GDP, banks need to support rural communities, farmers and businesses, especially in these tough economic times. . .

Banks are businesses and they need to make good profits to stay in business.

Is it too much to hope that the inquiry will show they can do that while offering lower interest rates to rural businesses and better services to rural communities?

Ele Ludemann is a North Otago farmer and journalist, who blogs HERE - where this article was sourced.