Bendigo and Adelaide Bank Submission: Inquiry into Regional Development and Decentralisation
Bendigo and Adelaide Bank is pleased to make a submission to the Inquiry into Regional Development and Decentralisation. Our submission contains expert commentary, community case studies and replicable solutions relating to the Terms of Reference.
As an organisation our Bank has strong ties to Bendigo, but our footprint and impact is felt more widely than Central Victoria. Through our vast and diverse network we are intrinsically linked to hundreds of rural and regional Australians and we can provide a unique insight into the experience, aspirations and activities of the people living in these communities.
We know what’s happening at a grass roots level, but also see national trends. As a result we’d like to present three key opportunities to the Inquiry. These are to:
1. Streamline pathways for mobilised communities to access the funding and support required to fulfil their self-identified needs.
2. Facilitate and encourage shared service models to drive improved social outcomes and economic productivity.
3. Encourage people to live, work and do business in rural and regional Australia.
We would like to affirm that Bendigo and Adelaide Bank is committed to working with government to grow prosperous, vibrant and sustainable rural and regional communities.
Index
1. Bendigo and Adelaide Bank’s experience of corporate decentralisation
a. About Bendigo and Adelaide Bank
b. Bendigo and Adelaide Bank in Bendigo
c. Initiatives to attract, retain and build skilled labour
Scholarship Program Work Experience Program Graduate Programs Industry Based Learning Scholarship Australian Business and Community Network (ABCN) University Community Bank® Model Grow Our Own
d. Initiatives to improve access to capital
Social Impact Loans (Apprentice Support Program) Small Business Program Young Farmer Finance Farm Management Deposit Offset Account Research and recommendations to improve access to capital for agribusiness
e. Population management
2. Community Banking – a best practice approach to regional development
a. About Community Banking
How Community Banking works Community Balance Sheet
b. Leveraging the Community Bank® investment
Case Study 1: Lang Lang, Victoria Case Study 2: Rye, Victoria Case Study 3: Mareeba, Queensland
c. Making community-led solutions easy
d. Issues identified by the regional and rural Community Bank® network
1. Bendigo and Adelaide Bank’s experience of corporate decentralisation
1a. About Bendigo and Adelaide Bank
Bendigo and Adelaide Bank started out in Bendigo during the gold rush in the 1850’s. Our belief then, as it is now, is that the role of a bank is to feed into community prosperity – not off it. From humble beginnings, we’ve grown to be a truly national organisation. We’re a top 60 ASX listed company and employ more than 7400 people (including about 1300 people in Bendigo where our head office is based). We operate a diverse range of brands, but we’re most commonly recognised by our retail brand Bendigo Bank.
Our Bank and the communities we serve have experienced increased prosperity over the past 20 years. This has been largely driven by the growth of our unique Community Bank® model, which is the most famous iteration of the Shared Value business models we create and operate. Shared Value business models (like our own) play a key role in business and society, as they apply a commercial solution to a societal problem thus generating a win for business and the community.
Community Banking is a world-renowned example of a Shared Value business. Through this model our Bank and the communities we partner with have been able to provide a significant and ongoing capital injection into the Australian economy and more specifically regional economies where more than half of all Community Bank® sites are located.
Community Banking is just one way our Bank partners with regional communities, yet it is where our organisation has developed the most expertise and understanding in what communities really need to be successful.
As a Bank, we collectively know a lot about Australia outside of the metropolitan capitals. From our experience in regional communities, we can see that the key to creating healthy economies is striking the right mix of skilled people, connecting them, and ensuring they have access to the capital required to build strong, vibrant, engaged and inclusive communities.
1b. Bendigo and Adelaide Bank in Bendigo
Bendigo and Adelaide Bank is headquartered in Bendigo, and we’re one of only a few top 100 ASX listed companies to base itself outside of a metropolitan city. Our organisation has not experienced decentralisation in the traditional sense, instead we have always been based in Bendigo and have successfully grown a national business from a regional location. We now boast offices and branches in more than 650 locations across Australia, and one agency in Nauru.
In 2008, the Bank built its new headquarters in the heart of Bendigo’s CBD – an investment that instantly transformed the city and put it on the map as the leading regional centre for financial services and forward thinking. The Bank employs about 1300 people in Bendigo which makes a significant contribution to the diversity and strength of the local economy. Below is a snapshot of economic analysis performed by the City of Greater Bendigo exploring the multiplier effect of the Bank’s presence in Bendigo:
1c. Initiatives to attract, retain and build skilled labour
Bendigo and Adelaide Bank’s contribution to the Bendigo economy is evident. However, we have expanded our efforts to attract, retain and build skilled labour in regional and rural communities Australia-wide through a number of purpose-built programs and initiatives. Our organisation has a strong focus on educating and upskilling young people and the following case studies detail how these efforts are building human and economic capacity in the regions.
Scholarship Program
The Bendigo and Adelaide Bank Scholarship Program was established in 2007 to address the disadvantage students from regional areas face in attending tertiary education compared to their metropolitan counterparts.
Starting from just one scholarship, the Program has grown such that today it is the Bank’s most financially and socially significant contribution to education, addressing the growing education gap between people living in regional and metropolitan areas.
The Program has seen consistent expansion over the past 10 years to include partners such as the Bank’s Community Bank® network, La Trobe University, University of Melbourne and Montmorency Secondary College.
Building on Rural Finance’s 25 years of scholarship history, Rural Bank extended its Scholarship Program in 2017 to support nine undergraduate university students pursuing studies relating to agriculture and rural sustainability. Originating from all corners of Australia, the successful recipients represent the next generation of rural leaders who will bring fresh and innovative approaches to the agricultural sector.
Work Experience Program
Established in May 2014, the Work Experience program provides Bendigo secondary school students with experience working in the banking and finance industry for one week. In 2017, about 50 students will experience a typical work day, with more than 200 students, teachers and staff working together to support and maximise the experience.
Graduate Program
The Bendigo and Adelaide Bank Graduate Program was established in 2012 to provide university graduates experience working in the financial services sector gaining skills across a variety of divisions that strengthen their chosen field of study. This year, nine students located in Melbourne, Adelaide and Bendigo were employed, with 28 graduates completing the two year program since it launched.
In addition to the Group’s Graduate Program, the Ag Achievers Graduate Program offers training to university graduates to develop specialist knowledge in agribusiness and finance. As part of its commitment to growing rural leaders, Rural Bank welcomed three graduates in Victoria and South Australia in 2017, giving them a kick-start to their career and the opportunity to retain employment with the Bank upon completion of the program.
Industry Based Learning Scholarship
Since 1995, the Industry Based Learning Scholarship has funded students undertaking Computing or Information Technology degrees at La Trobe University, Bendigo, providing a year of industry experience as part of fourth year study. More than 80 students have received a scholarship, significantly increasing their learning outcome and employment prospects in their field of study. Many scholarship recipients have been employed at the Bank’s headquarters in Bendigo, enriching the region with skilled technology professionals.
Australian Business and Community Network (ABCN)
Bendigo and Adelaide Bank has actively supported ABCN in South Australia, Queensland and Victoria since 2013 through various mentoring programs with high-needs schools to improve opportunities for disadvantaged students. In addition, the Bank has supported the ABCN Foundation Scholarship Program for year 11 and 12 students such as Central Victorian student Meghan Frederick, who has her sights set on a career in medicine or scientific research. This funding assists in purchasing study resources and help alleviate the financial strain of further education.
University Community Bank® Model
Deakin University Community Bank® is an Australian first Shared Value partnership between a tertiary education provider and a financial institution. Based on Bendigo and Adelaide Bank’s well-established Community Bank® model, the Deakin University Community Bank® assists the university to deliver sustainable community outcomes. Through staff, students and alumni choosing to bank through Deakin University Community Bank®, contributions are directed to the university community to fund activities such as clubs and societies, scholarship and research programs, or community projects. After just 12 months of operation, $50,000 has already been made available for reinvestment.
Grow Our Own
Bendigo and Adelaide Bank and Deakin University has formed a partnership with local leaders from industry, education, community and government in the Western Riverina to pilot an education and skills plan for the region. Grow Our Own is an exciting regional movement, developed to provide information to potential students and on-the- job trainees, and to business people in this region. The aim is to encourage people to build a career while living locally, and to encourage local business to invest in local people through employment, training, mentoring and motivation. We’re already seeing great success and have been approach by numerous other regional communities who are interested in adapting and replicating the model.
1d. Initiatives to improve access to capital
Bendigo and Adelaide Bank has also engineered a number of initiatives to improve access to capital, with a focus on small businesses (including those in rural and regional communities) and agribusinesses (the majority of which are in rural and regional communities).
Social Impact Loans (Apprentice Support Program)
In 2015, Bendigo and Adelaide Bank partnered with a number of long-standing Credit Unions in an operating model much like the Community Bank® model but with the express purpose of enabling these community-owned social enterprises to invest their substantial accumulated capital and profits in the sustainability of their communities. This was the genesis of the Alliance Bank model.
The Social Impact Loan program enables Alliance Bank partners to support businesses and projects that have wider community benefits (i.e. social impact). Leveraging Bendigo’s infrastructure, Alliance Bank partners can apply the profits from running their social enterprise to borrowers that wouldn’t qualify for loans from Bendigo’s balance sheet because of the risk and return restrictions. Alliance Bank partners determine the risk and reward themselves and importantly can consider local knowledge and community benefit in making these Social Impact Loans.
The first Social Impact Loan was made by BDCU Alliance Bank in December 2016. It enables local apprentices to access a no-interest loan to purchase tools of trade, and is part of a wider Apprentice Support Program designed to support community sustainability through seeding and fostering local business. The broader program includes discounts on tools from local suppliers, a financial literacy mentoring program and a professional mentoring program.
The Apprentice Support Program is designed to: • Build credit worthiness • Increase personal confidence, financial literacy and business and leadership skills • Improve financial self-reliance and independence • Create financial savvy employees
However the social outcomes of this program are broader than the individual. The social outcomes for the community are: • Apprenticeships provide a genuine option for school leavers. • Young people remain in the local region and don't have to leave to seek gainful employment. • Successful apprentices will often commence their own business and subsequently employ others. • Young people who successfully complete their apprenticeship and then go on to form and run their own businesses employing others and becoming the future leaders of the community.
The next iteration of the initiative will explore providing seed capital to help grow social enterprise businesses in regional communities.
Small Business Program
Bendigo and Adelaide Bank wants to help small businesses access capital, so they can grow their prosperity and contribution back to local economies and communities across Australia. Small businesses account for 44 percent of jobs in Australia and contribute about one third of economic activity. We have recently revised the way we engage with and serve small businesses and we’re focused in driving better outcomes by:
o Training and upskilling employees in our branch network to ensure small business customers receive the best possible service and expertise in their own ‘main street’ at their local branch. o Ensuring our pricing and lending policy are fair, competitive and represent a ‘good deal’ for small businesses. o Placing more support and resource behind our ‘small business mobile lenders’ to ensure they can serve small business customers in a wider range of locations – especially rural and regional communities o Improving our technology and online offering including: - Partnering with Fintech ‘Banjo’ to develop an online unsecured financing solution, at selected regional Victorian locations. - Developing a ‘Credit Decision Engine’ for small business loans to speed up the approval process. - Creating an online ‘Business Hub’ to improve financial literacy and access to tools and information for small business owners.
Young Farmer Finance Scheme (Victoria)
Raising sufficient capital can represent a challenge for young people who want to establish a farming business. As part of a commitment to foster the next generation of farmers and rural leaders, Rural Bank delivers the Young Farmer Finance Scheme in Victoria in partnership with the Victorian Government. The Scheme is aimed at supporting eligible young Victorian farmers into asset ownership, including land, equipment or livestock purchase, with funding up to the value of $25 million per annum available under the scheme.
Farm Management Deposit Offset Account
Rural Bank released its new Farm Management Deposit (FMD) Offset Account in 2016, the first and only one of its kind in market. Developed in response to legislative changes in FMD criteria, this innovative solution assists farmers to better manage their cash flow fluctuations, allowing them to set aside and earn interest on pre-tax income from profitable years, and draw down on it when needed most, while gaining potential tax advantages. The market-leading Rural Bank FMD Offset product enables farmers to offset funds held in an FMD account against the balance of an eligible variable rate Rural Bank Term Loan, which may assist in reducing farm business funding costs.
Research and recommendations to improve access to capital for agribusiness
Rural Bank Chief Financial Officer Will Rayner, recently completed a Churchill Fellowship exploring how Australian farmers access debt to fund their ongoing operation and business growth. His findings and recommendations will be made public in early November 2017 (next month), however we are pleased to present an overview of these ideas for the consideration of the Committee.
Mr Rayner reports that in order to realise the enormous potential of agriculture, and to fuel the economic and social benefits family farmers provide to the Australian economy, we should be investigating ways to deepen and broaden the sources of capital sources available to the sector. While there is no ‘simple fix’ he proposes four key recommendations to encourage greater investment in agriculture and to ensure the ongoing vibrancy and competitiveness of the family farming sector. These recommendations include:
1. To encourage both family farmers and the institutional investment community to become ‘investor ready’. This will be achieved by improving financial structures and literacy, and using better data and benchmarking tools to allow for better investment decisions. The application of better data will allow for better risk management, and therefore
reduce the cost of capital to the sector. Becoming investor ready will also require market participants to pool assets and/or resources to provide the scale required to attract most institutional investors.
2. Contemplate and address cultural issues presented by (or preventing) greater use of alternative capital structures in the family farming unit.
3. Encourage government to reduce the structural barriers to institutional investment in the sector – with a particular focus on global funds management and asset allocation within the domestic superannuation sector.
4. Encourage a deeper ‘fit for purpose’ suite of risk management tools available to family farmers. This is likely to include a form of ‘multi-peril’ insurance to encourage broader investment in the sector, with an additional potential benefit being reducing the role of government in supporting farmers experiencing drought and other natural disasters.
1e. Population management
Australian cites are struggling to meet the demands of growing populations, and this has the potential to impact the livability of our major centres – particularly Melbourne and Sydney. Meanwhile many rural and regional communities desire population growth and have surplus infrastructure available. A more sustainable and balanced approach to population distribution should be planned for.
We know the highly skilled employees we need to grow Australia’s economic prosperity are mobile and global citizens. Research by CEDA shows city livability is a strong predictor of economic activity and wage growth. That’s because it indicates an area’s ability to attract and retain a new innovative class of worker. These ‘knowledge workers’ create jobs at a much higher rate than others do, driving benefits for all parts of economy and society. But our ability to entice and keep knowledge workers is seriously undermined in the absence of sound population strategies.
Price Waterhouse Cooper estimate by 2020, the cost of urban congestion in Australia is expected to more than double to $20.4 billion. By 2030, Australian cities will need to cope with the added pressure of 30 percent more people, with increasing city density placing more pressure on infrastructure, the environment and the interconnectedness of society. Regional cities will also grow, however not as fast as the metropolises, while the small town drift is set to continue - yet it doesn’t have to be this way.
And a more balanced and sustainable approach to population growth could not only address the livability standards of the big cities, but also regional communities. A liveable city doesn’t have to be a big city – the two don’t necessarily go hand in hand. The Regional Australia Institute has found more Australians aged 25 to 44 are moving from cities to regional areas, than the other way around. Many of these people are making the change for lifestyle choices, with housing affordability a significant draw card.
To get a significant up-tick in regional population growth we should not only encourage internal migration, but also external migration. Many countries in our part of the world also have mobile knowledge workers, and we need to put more effort into attracting and encouraging these people to regional Australia.
We know regional communities already possess many of the characteristics of a liveable city, but we also need to ensure these communities are connected be it via infrastructure or technology. These are also key components to attracting and retaining people in regional and rural communities.
2. Community Banking – a best practice approach to regional development
2a. About Community Banking
In the 1990’s a number of Australian banks rationalised their branch services across Australia, with almost 2000 branches closed by Bendigo Bank’s competitors in the 1990’s.
These branch closures were often focused on regional and rural parts of Australia, and had the greatest impact on the economic prosperity of these communities as branch closures often prompted the departure of other services and businesses from the town, further exacerbating population decline.
Bendigo Bank’s Community Bank® model was developed with regional and rural Australian communities in response to this problem, and the first Community Bank® Branch opened in 1998.
The Community Bank® model is unique to Bendigo Bank and is an internationally renowned example of a Shared Value business model – that is a business designed in response to address a social problem while meeting business objectives and thus creating a win for society and business alike.
The partnership sees Bendigo Bank form a franchise agreement with a community that has displayed (through raising capital, attracting customers and volunteer effort) that it is capable of owning and operating a bank branch.
Once the Community Bank® is operating and profitable the income made from the banking business is shared equally between Bendigo Bank and the community, and in FY2016 Community Banking generated more than $224.7 million in revenue. The Community Bank® board (made up of local volunteer leaders) then distribute earnings to local shareholders and invest capital into local initiatives. Community Bank® branches do far more than provide banking services - they create an alternative and sustainable source of income communities can use to fund (and leverage funding for) the initiatives and activities they choose.
The branches also create new local jobs, helping to address issues associated with growing and sustaining population in regional and rural areas. Currently more than 1600 people are employed by Community Bank® branches nation- wide, in FY2016 our Community Bank partners paid more than $116.9 million in salaries, with the flow on economic impact generating further job opportunities and retail demand at a local level.
Community Banking has a long history of fully funding or providing seed funding for major infrastructure projects worth millions of dollars. However, it also meets shortfalls in community funding, providing things like football jumpers for the footy team, change rooms for the women’s tennis club, new seats for the local theatre, scholarships that help young people get to university and TAFE or tools for the local men’s shed. These are the little things that make a big difference, and help to make regional and rural towns a liveable destination which in turn helps them to attract other people, businesses and industries to their community.
Community Banking plays an important role in strengthening and diversifying the local economy, as they create new public companies (often in communities that have never had one). It provides new ways for local people to become shareholders so they can invest and grow their personal prosperity, while supporting a truly local community enterprise. To date more than $48 million in Community Bank® dividends has been paid to over 75,000 local shareholders.
Community Banking builds local leadership capacity and governance practices through the formation of Community Bank® boards, which are comprised of local volunteer directors who oversee the operation of the local Community Bank® company. More than 1900 directors volunteer an average seven hours a week to ensure the successful running of their local Community Bank® company, and many of these people use the transferable skills they acquire by serving on a Community Bank® board at other local businesses and organisations like sports clubs, local council or social and emergency service groups.
Since 1998 almost 320 Community Bank® branches have opened, with about half of the network located in regional or rural locations. The network has generated $165 million in capital for reinvestment in local communities, and all of this money has been spent addressing local needs, wants and aspirations. It’s worth noting this $165 million has also been able to attract other forms of funding, with communities often using Community Bank® capital to attract investment from other stakeholders including government.
At first, Community Bank® branches filled the economic and social void left following the closure of major bank branches in rural areas. Now, you’ll find Community Bank® branches in cities, suburbs and regional communities across Australia.
The driving ambition of every Community Bank® company is to make local investments which enhance and grow community capital. One of the key ways they achieve this is by facilitating grass roots community planning, which helps organise a community and get them to prioritise their shared objectives. Together the Community Bank® and community can devise solutions which better prepare them for future challenges and opportunities.
As Community Bank® sites and leaders mature and evolve we’re also seeing a growing desire for collaboration and cross-investment. Community Bank® sites are joining forces to harness the power of the collective by sharing skills, expertise, resources, and capital, so that together they can address challenges and opportunities across regions, states or nationally. Community Bank® sites are also exploring collaborative partnerships with other key stakeholders in their community, many forming community or business hubs that have a broader community service delivery objective.
Community Banking has been transformative for hundreds of communities across Australia, creating stronger economies and more vibrant places for people to live and work in.
Community Bank® Network Growth Financial Sites Opened Total Sites Year Jun-98 2 2 Jun-99 8 10 Jun-00 13 23 Jun-01 22 45 Jun-02 26 71 Jun-03 30 101 Jun-04 28 129 Jun-05 20 149 Jun-06 29 178 Jun-07 20 198 Jun-08 17 215 Jun-09 18 233 Jun-10 20 253 Jun-11 16 269 Jun-12 20 289 Jun-13 2 291 Jun-14 7 298 Jun-15 6 304 Jun-16 5 309 Jun-17 7 316 Jun-18 1 317
TOTAL COMMUNITY BANK
LOCATIONS BY STATE
317
140
52
49
43
14
12 4
NSW QLD SA VIC WA TAS NT TOTAL
REGIONAL & RURAL COMMUNITY BANK
LOCATIONS BY STATE
178
74
28
27
23
12
10
4 0
ACT NSW QLD SA VIC WA TAS NT TOTAL
*Demographics are based on remoteness areas defined by the Australian Standard Geographical Classification used by the ABS ** Sites classified Regional are in either "remote", "outer regional" or "inner regional" remoteness classifications ***Sites classified Major Cities are in the "major cities" remoteness classification
2b. Leveraging the Community Bank® investment
Community Bank® branches do far more than provide banking services, they empower local people and create an alternative source of income that communities can use to fund the initiatives and activities they choose – assessing and meeting local needs and desires. Sometimes communities have big dreams and they look to leverage Community Banking capital to attract additional funding – usually from local, state and/or federal government. The following are case studies detailing how our Community Bank® partners have helped to provide the capital and local leadership required to help make major projects a success.
Case Study 1: Lang Lang, Victoria
Lang Lang’s $18 million ‘field of dreams’ 10 year plan to build a community recreational reserve is today well on the way to becoming a reality.
The Lang Lang Community Bank® Branch committed the initial $3.3 million to the project and, importantly, lobbied government and the private sector to provide the additional $15 million.
The remaining funds will be used to fulfil stage one plans which includes the construction of two football ovals, four netball courts, car parking, access roads, wetland and storm water re-use system, irrigation and lighting.
Case Study 2: Rye, Victoria
In 2014, the Rye & District Community Bank® Branch identified the need for an accommodation complex for intellectually disabled adults in its community.
The board voted to support the project and committed a sum of $250,000. This commitment opened the way for the Cloverleaf project to leverage $2 million in matched funding from the federal and state Governments.
The family of each potential resident have also agreed to contribute $30,000 each, adding another $240,000 to the total. The Cloverleaf project is now no longer a dream, it’s a reality.
Case Study 3: Mareeba, Queensland
Having looked for a major community project to support for some time, the Mareeba and Dimbulah Community Bank® branches chose to commit $1 million to the Mareeba Recreational Complex.
In partnership with various sporting clubs in Mareeba and the Mareeba Shire Council, the almost $1 million project has developed from a standalone sports complex into a major sporting and recreational precinct, including walking paths and bikeways for the broader community.
The establishment of accredited sporting facilities in Mareeba will allow basketball, netball and cricket to attract regional and district carnivals that will drive increased visitation to Mareeba and raise the profile of the town. The new infrastructure will also provide better training facilities for young sporting professionals.
2c. Making community-led solutions easy
Through our ongoing work with local communities our Bank and Community Bank® partners have recognised an even greater opportunity to leverage Community Bank® capital. To ensure we fully capture this opportunity we require all levels of government to reduce complexity surrounding grant application processes and create a framework that streamlines the leveraged funding process.
If we can build this together communities will be better able to raise their own capital (through fundraising and private enterprise) and then use it to attract further investment from government, resulting in community-led and owned approaches that best meet the needs of local people.
We also see a gap in stakeholder co-ordination and believe a dedicated community resource with the skills and networks required to successfully guide communities through leverage funding opportunities would produce more robust projects for government to partner with.
2d. Issues identified by the regional and rural Community Bank® network
As we’ve already outlined, one of the main roles a Community Bank® is to bring the community together and help facilitate a plan to grow community capital and prosperity. Once a community can identify its needs and aspirations the Community Bank® can help to provide the funding required to make these shared dreams a reality.
The Bank wanted to better understand the key community-building challenges faced by our Community Bank® partners and the communities they serve. In 2016, we asked them to identify their community’s top concerns. About 1000 Community Bank® directors and senior employees participated, and the following graph details the feedback from our leaders in regional and rural communities. Many Community Bank® boards are already working with local people to address these issues through community-led solutions.