The Bank Referral Scheme - has it delivered on its promises?
Martine Catton - Sales and Marketing Director
I read with interest recently of the appointment of Professor Russel Griggs to review the current referral process for the Bank Referral Scheme. My interest was speared as I too had been wondering as to why the number of referrals into the alternative lending space hadn’t increased, in-fact its made very little impact to lenders like us.
When the scheme launched in November 2016, the promise from the government after much debate with many high profile members of the advisory committee was simple… businesses requesting facilities that the banks were unable to support would be asked if they were willing to be referred via the scheme to seek funding from an alternative provider. On the face of it that should have been a win win all round. The bank can still assist their clients, and the SME would be able to obtain the funding they needed. A further benefit was that the lending landscape had changed and many new entrants to market could provide funds and increase the awareness of alternative lending avenues.
What’s the reality post launch? It is very different to that of the vision and the theory. So why is it that there hasn’t been the significant uptick of referrals coming into the market that was anticipated?
Is it because the types of funding being requested from the banks is too unusual meaning they cannot be funded by the panel members on the 3 accredited platforms ? Is the process of making a referral too complex and in turn creating blockages? Is the scheme viewed by the banks as a cumbersome compliance process? Or as I first predicted, is it because the referral is only offered when the credit committees centrally have declined the facility?
Having worked for a bank for many years you become adept and knowing what will and won’t be accepted by your credit team and rarely would you send something to credit that you weren’t sure of being accepted. This would significantly reduce the number of referrals and leave the bank free to introduce a trusted provider with whom they have likely worked over a number of years. There is nothing wrong with this approach – it has worked for many years BUT I for one am looking to understand how the scheme can be improved. If only to enable the SME to have a greater number of options from which they can make a choice that’s right for them. We can provide the SME with a great customer experience and identify a number of choices for them that supports the growth of their businesses. After all isn’t that why we are all here? To support SMEs with the funding solutions they want and require?