Josh Frydenberg announced on Thursday that an investment capacity of $15 billion will be provided by the Australian Office of Financial Management (AOFM) to purchase issuance from small non-bank lenders over the course of a year.

The Treasurer highlighted how the pledge of this substantial sum of money would impact wholesale funding markets. The intent behind the financial assistance is to aid competition in the banking sector, helping small businesses weather the crisis which developed as a result of the coronavirus pandemic.

It is thought the AOFM will be responsible for assessing each application individually. The lenders will be encouraged to apply directly if they are in need of funds and adhere to the application criteria.

It is understood that organisations wanting to apply cannot be authorised deposit-taking institutions (ADIs). Various other asset-backed securities and warehouse facilities would be considered although, this wouldn’t include unsecured loans.

The Reserve Bank of Australia has already made $90 billion available to the top banks. This is to encourage lending to struggling SMEs operating within the sector. Another attempt made to safeguard the Australian economy and its future.

The attempt has been widely recognised by eligible lenders. Fintechs especially have reacted positively to the news.

“This fintech sector, and especially the tech-enabled SME lenders have never been more important than today. The ONLY way that the government can implement its policy of supporting the SME community is by using the tech-enabled lenders to originate, underwrite and service the loans. Lumi is ready to help any stimulus policy.” Announced Yanir Yakutiel, Founder and CEO of Lumi, an Australian fintech operating within the SME loan sector.

It is assumed that $1 billion lent by a fintech generates a corresponding flow of money through the economy, resulting in an estimated $4 billion increase in GDP and over 50,000 jobs maintained.