Cash Converter Business Growth

Question: Discuss about the Cash Converter forBusiness Growth. Answer: Discussion: In response to the legislative changes, Cash converter has transformed its business model and was so designed to get access to the credit by taking the advantage of vulnerable borrowers. Borrowers were compelled to pay high brokerage fees by appointing brokerage. This can be explained with the help of an example, borrower getting the credit of amount say $ 400 would get a brokerage fees of $ 100. This huge amount of fees was due to newly designed business model and on the other hand, the real rate of interest charged was much below this particular amount (Ali et al. 2015). The business growth of cash converter was regressive and this happened post the practice of charging higher interest rate. This happened for a period of four years from 2009 to 2013. Company has a revenue growth of 27% in the year 2009 and this was followed by profit of amount of $ 16.2 million. There was a subsequent growth in the personal loan book of $ 113036461 at June end 2016 as compared to $ $ 119448669 in the year 2015. Group hold a material cash balance sheet for the year ending 2015. Seven month and one month cash loan has material cash impact due to higher fees charged (Benn et al. 2014). Cash converter suffered a loss of $ 21.5 million in the year 2015 as compared to $ 24.2 million in the year 2014. Australian loan book of Cash converter suffered a downtrend of compared to a peak point recorded in the previous year. The highest point was $ 115.5% in that year. During the period concerned, the growth in the share price of the company was steady. There was a downfall in the price of shares in the year of class action against the company. In the year 2014, the price of shares of the company kept trading between the range of $ 0.80 to $ 1.88. Due to development of downtrend in the year 2015, there was fall in the trading price of shares (Jancauskas 2015). The share price of the company for a time of seven years can be depicted in the graph below: Share price of cash converter from 2009 to 2016 (Source: created by author) It is very essential on the part of the financial institutions to embed sustainable business practice in the conduction of their business. Sustainability practice in the financial institution is the provision of financial capital and risk management services and product that assist the organization in contributing to the economic prosperity and well-being of the country. Financial institutions that needs to be established as a part of their goals do the financial interest and long-term development of the society. It becomes utmost important on part of the financial institutions to carry out their business activities by employing ethical practices and thereby contributing to the social benefits of the society (Packman 2014). The contribution of financial institutions sustainability becomes incomparable considering the role they play in financing of the development activities. Concern of human rights should be reflected in the business practice of such institutions. Aligning the corpor ate social responsibility in the business strategy of such institutions would help in implementing the corporate sustainability activities. Some of the social responsibility of these institutions would include its role in energy conservation, education, donation and scholarship, healthcare and emerging markets (Morabito and Ekstein 2016). The social responsibility of cash converter should be like any other institution practicing sustainability practice. Shareholders would be able to get the long-term value if the company becomes socially responsible. Cash converter is required to screen their investments against the criteria set by the company for development purpose and integrate sustainability practice into the risk management system. Charging the higher interest rate above legal limits from the borrower is a threat to their well-being. Protecting the interest of customers is the responsibility of the organization. Growth and financial position of the company is highly affected by incorporating unethical practices. Cash converter is also required to have a stakeholders engagement in order to face the complex sustainability challenge. Maximizing the revenue and generating profits to shareholders should not be at the cost of losing the customers (Leeks and Luck 2016). Conclusion: It can be deduced from the above discussion that the lending practice followed by Cash converter was not ethical. The transformation of business model in response to change in the legislation was not for the welfare and benefits of its clients. Rather, it made them pay substantially higher interest rate and exorbitant fees on their loan amount. It is necessary for Cash converter to make the transformation of business model so that it helps in addressing the sustainability and social challenge. Any financial institution should not indulge in such practice that would hamper its reputation and image in the market. Reference: Ali, P., McRae, C.H. and Ramsay, I., 2015. Payday lending regulation and borrower vulnerability in the United Kingdom and Australia. Benn, S., Dunphy, D. and Griffiths, A., 2014.Organizational change for corporate sustainability. Routledge. Jancauskas, R., 2015. Product liability class actions in Australia.Precedent (Sydney, NSW), (129), p.23. Leeks, A. and Luck, K., 2016. Queensland set for class actions: Practical issues and implications.Proctor, The,36(10), p.16. Morabito, V. and Ekstein, J., 2016. Class Actions Filed for the Benefit of Vulnerable PersonsAn Australian Study. Packman, C., 2014. Discussion Points. InPayday Lending: Global Growth of the High-Cost Credit Market(pp. 114-132). Palgrave Macmillan US.