A new parliamentary report has called for red tape on Indigenous Business Australia (IBA) be loosened, despite Aboriginal business people raising concerns over its effectiveness.

IBA is a Federal Government organisation that provides home loans and business finance to Aboriginal people.

The Standing Committee on Indigenous Affairs’ August employment and business report made 17 recommendations about tightening government processes to prevent black cladding and support the black business sector to expand.

Recommendation three called for the government to “remove legislative and other barriers that could impede Indigenous Business Australia (IBA) from  expanding its operations”.

Under the Aboriginal and Torres Strait Islander Act 2005, the report said, IBA is limited from undertaking normal commercial activities like borrowing to raise capital.

In a submission IBA said that if it was able to leverage its existing home loan book and secure additional funding by borrowing, it could lend to more customers.

Committee Chair Julian Leeser said he believed the government should support the lender.

IBA’s Executive Director of Government & Public Relations, Sean Armistead said he looked forward to seeing the recommendations implemented.

“Reviews like this support the ongoing importance of initiatives that advance Aboriginal and Torres Strait Islander people in our economy,” he said.

But Aboriginal business people say the organisation’s design doesn’t work to break down the generational poverty barriers stopping Aboriginal people building businesses.

Wiradjuri man Paul Towney runs Wiradjuri Demolitions, an Indigenous asbestos and demolition business.

When Towney approached IBA for finance, he was surprised to find that the organisation required customers to have a large amount of equity as security for a loan.

“Economically we’re at the bottom of the pile, Indigenous people in Australia; and that’s government stats, we’re not making it up,” he said.

“I’m doing everything else, going out and getting my licences and setting up a company and getting my certifications, but we just don’t have the finance to compete the open market.

“And you tell [IBA] that, and they say ‘oh, sorry, we can’t do anything for you’.”

Towney even said mob might be better off going to a traditional bank than IBA.

Wonnarua woman Amanda Healy has been in business since 2004; mining giant Fortescue recently awarded her engineering company Warrikal – one of the largest contracts given to an Aboriginal-owned business in the country.

Healy has had both positive and negative experiences when seeking capital from IBA, but she said their model doesn’t fit the needs of Aboriginal people.

“If you seriously wanted to set up a decent business, you probably need about half a million dollars to get you through the first three to five years,” she said.

“So that means to get a loan from IBA, you would need a house to support that that has half a million dollars in equity in it.”

“Not many of the mob I know have got houses worth that, let alone having that equity in there.”

“If you’re looking at it as an outsider, it looks like it was designed to just be smoke and mirrors.”

Healy said the need for the organisation to be careful with funds doesn’t outweigh the need to make a real difference to Aboriginal people’s lives.

“They continue to say, ‘oh, it’s because we’re responsible to the Australian Government, and we’re responsible to taxpayers’, but they seem to forget that they’re also responsible to us as well,” she said.

Shadow Assistant Minister for Indigenous Australians Warren Snowdon said further consultation was needed before changes are made based on the recommendation.

“How IBA might be given greater freedom and opportunity to expand its operations would be very much dependent on further consultation and discussion,” Snowdon said.

“There is a clear desire by IBA to be able leverage their asset pool, at the moment though there are legislative barriers and a barrier within their charter.

“These restrictions impact on their ability to raise capital and to provide the financial and business services that customers are after.”

Snowdow noted that the National Indigenous Australians Agency (NIAA) is working with IBA “on these issues conscious of the need to appropriately manage risk”.

By Sarah Smit