The Commonwealth should buy Judo Bank.

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As a nation we cannot continue to rely on privately owned banks to achieve public outcomes like supporting the vital SME sector. When push comes to shove, banks will always act in the best interests of their shareholders – and so they should.

What we need is a government owned SME bank that can improve access to finance and directly and promptly implement fiscal policy.

So here’s an idea ……the Commonwealth should consider acquiring Judo Bank. To be clear, this is the Commonwealth of Australia and not the CBA.

And for the sake of complete transparency, the writer has no current or past association with Judo Bank.


Immediate and sustained policy impact. The Covid-19 crisis has demonstrated why it is crucial for the Government to be able to make substantial and decisive economic intervention. Being an owner of a bank would be a more effective way of implementing fiscal policy than trying to work through intermediaries like the big banks.

Good fit. Judo is an established, albeit relatively new bank, with a sole focus on SMEs. It is not a traditional bank which suggests it may have a greater capacity to be flexible in changing circumstances. Turbo charging Judo with Government backing could have an immediate and on-going impact on the survival and growth prospects of SMEs across the country.

Substantial due diligence has already been undertaken. Last year Judo was granted ADI status. APRA doesn’t hand out banking licenses easily. Every aspect of the business would have been examined in detail before the license was granted.

The Government has backed Judo with significantly more funding than any other SME bank or non-bank lender outside the big four. $500m of taxpayers money has been committed to Judo’s warehouse facilities via the Structured Finance Support Fund and the Australian Business Securitisation Fund. In addition, Judo is one of a small number of lenders approved under the $40b SME Loan Guarantee Scheme.

Relatively low upfront cost. Taking equity is a different proposition to providing debt but if the Government believes it is safe to lend in excess of $500m to Judo, why not adopt the Remington strategy of “I liked the product so much I bought the company”? At the end of the day, the payback is dependent on the same source.

Yesterday Judo announced it has raised new capital of $230m on top of the $540m raised in two earlier rounds. The latest raising reflects a valuation in excess of $1b. The cost of acquiring Judo would be insignificant when compared to the amounts made available to the banks and other programs like Jobkeeper.

Send a message to the banks. For years governments have been at loggerheads with the banks. Rather than continuing to try to tell the banks what to do, this would be an opportunity to show them how it is done.


Co-CEOs Joseph Healy and David Hornery often refer to the sense of pride and purpose Judo takes in supporting and standing behind their customers. Being owned by the Commonwealth would enable Judo to fulfil its vision in a bigger way than it may have ever dreamt possible.

The prospect of being able to grow the lending book without being constrained by access to and cost of capital would be of huge appeal. Helping small business owners fulfil their dreams is much more rewarding than dealing with investors and lenders.

Being acquired by the Commonwealth would validate Judo’s reason for existence and create a legacy the founders, shareholders and staff could be well proud of.


Small business owners are invariably time poor and many lack an understanding of finance. This is the attraction of the Judo “relationship banking” model.

The cumbersome structures and legacy systems of the big banks have made it difficult for them to achieve the dual objectives of meeting the service expectations of small business customers whilst optimising returns for shareholders. Dealing with big banks is even more problematic for small business owners unwilling or unable to offer property as security.

Many SMEs also take the view that the big banks are all the same so there is no point in changing. Disenchanted and under serviced small business owners are likely to be attracted to a government owned specialist SME bank which offers and delivers on relationship banking and at the same time is able to offer pricing akin to the big banks.


The Government already picks winners, directly and indirectly. It is currently backing industries like child care but not airlines. It is picking the banks as winners by giving them a line of credit of $90b at the rock bottom price of 0.25 per cent pa whilst the non-banks are denied a piece of the action thereby confining them to loser status.


If the Judo buy-out idea is a bridge too far, here there are alternatives which have considerable merit.

1. Broaden the mandate of the Government owned Clean Energy Finance Corporation. Currently the CEFC’s mandate relates financing clean energy industries and projects but with political will the CEFC Act could be amended to also cover the SME sector. Funding renewables is different to funding SMEs but at least the starting point of a government owned lending corporation is in place.

The Citizens Party, a registered political party, is currently running a petition to turn the CEFC into an emergency national investment bank with expanded powers. Although the Citizens Party’s proposed expanded powers do not specifically reference the SME sector there is no reason why this could not be added.

2. Create an entirely new state owned bank for SMEs. This approach works successfully in many countries including the UK (British Business Bank), the USA (Small Business Administration) and in the EU (European Investment Fund)

Previous newsletters on Why we should clone America’s Small Business Administration and Governments have a role in funding SMEs address these options. Kate Carnell has also flagged this concept of a government backed business bank.

The purpose of this series was firstly to raise awareness of the shortcomings of the current approach to funding SMEs, especially in a crisis and secondly, to propose some solutions including the left field idea of the Commonwealth taking over Judo Bank.

“Iso” has afforded the opportunity for reflection and this has has unleashed a wave of human creativity. Because there are no easy answers to the problem of SME access to finance, we need to continue to explore all possibilities.

If you would like to engage in this discussion, please feel free to provide your feedback.

Neil Slonim



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