2023 – A time to invest in alternative lending
2023 – A time to invest in alternative lending
Pandemics, war, the impact of Brexit and an economic recession are now in full swing - on the face of it, not the ideal backdrop for a mega 2023!
But, according to one of the Island’s leading bankers, even though companies and consumers alike face undoubted headwinds this winter and probably beyond, with careful stewardship, this it could still be a time of fresh opportunities – especially for small and medium sized businesses.
Douglas Grant, Managing Director of Conister Bank, said that his priority was to ensure both the bank and its customers stayed in good shape during the next 12 months and onwards.
“Navigating the current economic downturn, the cost-of-living crisis and inflationary pressures are this year’s major challenges for SMEs,” he said.
“Many people have been incredibly disadvantaged by the cost of fuel and rising prices generally. And wage inflation has not kept up with price inflation. This impacts every family, but it also impacts every business, too. They are just as prone to the increases in inflation as everyone else,” Douglas commented, adding that the bank had already taken action to help vulnerable customers.
“It’s tough for businesses to become more strategic and resilient when they are being hit by generational economic problems – but it can be done,” he said. “Nurturing good talent, embracing technology, focussing on resilient sectors that you understand along with optimising your working capital, these are all sensible housekeeping rules to bear in mind,” Douglas advised.
Conscious of the impact that rising interest rates were having for both customers and the bank’s performance, he said it was about striking a balance.
Responsible and targeting lending
In terms of the Bank’s customer base, he said SMEs probably needed as much support as consumers. “We are listening to all our customers. They need assurance from us through this period,” he observed.
Responsible and targeted lending was paramount. “We need to ensure we provide facilities that are relevant today. Businesses should preserve cash flow because cash will be king throughout this period. We need to ensure we’ve got the right working capital products in place for them, the right HP and lease products,” he said.
“For SMEs, if you need an asset, lease the asset. Spread the cost over time, so when good times return, you’re in a position to make an early repayment on that asset if you choose. But because of the current uncertainty, don’t blow a hole in your cashflow today,” he advised.
The Isle of Man – weathering the financial headwinds
Although the Isle of Man reflected the UK economy, Douglas felt that the Island had withstood the current financial headwinds reasonably well.
Local inflation had stayed marginally lower here than across the water, whilst Island unemployment remained encouragingly low. Those seeking work had even fallen slightly to 0.6%, against a UK figure that was nearly six times higher, he pointed out. “Even now, there are still more job vacancies than there are people registered unemployed.”
From Conister’s perspective, the continued drive towards greater digitisation had created an agile and consumer focused service – a major factor in why 2022 had been one of the Bank’s most successful ever years.
“There is no doubt that once we fully bring online deposit functionality to the Manx deposit customer base, we’ll be able to scale this aspect of our business,” said Douglas. “This has placed us in an advantageous position, attracting customers frustrated with the time it takes to open a deposit account elsewhere.”
Moving into the Mortgage Market
Aside from the Bank’s strategy of sticking to its tried and tested markets, Mr Grant said the post-Covid recession had also provided Conister with an opportunity to gain market share on Island “in areas where we haven’t competed historically.”
In particular, he cited the current mortgage market turmoil, with banks increasing both their rates and minimum deposit requirements, which both independently and collectively deter customers. “I do see an opportunity to offer a competitive, short-term product secured against property as a measure to counter the current volatility in this sector. Such a product would give the customer the ability to migrate to more traditional offerings as and when they wanted to – our focus is providing products our customers require in the world they now find themselves in,” he said.
As a company passionate about the ESG cause, Mr Grant said it was essential the Island protected and nurtured its precious assets – its farming community being a prime example. “We have an opportunity to move away from some overseas food, with its associated food price inflation and reduce the plastic food is preserved in. We should invest more in our local resources and help our local farmers through these difficult times. For example, Conister will continue to support farmers with their fertiliser cost which has tripled due to the war in the Ukraine.
We have other natural resources we should collectively be progressing. We should be working together to support renewable energy schemes and reduce our reliance on imported fossil fuels. Surely the last 12 months has taught us to be more self-reliant in terms of energy and food. We need to innovate, not be frightened of change and lead by example,” he said.
2023 – a year with plenty to think about, but no shortage of opportunity.
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