Dutch defense industry struggling to get bank funding despite pressure to scale up

Businesses in the Dutch defense industry are struggling to get funding from banks. Despite the increasing urgency to scale up production due to the many ongoing wars in the world, defense businesses run up against the same anti-money laundering and anti-terrorism rules that also make it challenging for sex workers and gambling companies to navigate banks, NOS reports.

Since Russia invaded Ukraine two years ago, there have been increasing concerns about war on European territory. NATO Admiral Rob Bauer recently said that member states should prepare themselves for a partial war economy focused on producing defense equipment instead of on the market. Defense Minister Kajsa Ollongren found that a good idea, as did former NATO Secretary General Jaap de Hoop Scheffer.

But despite this growing pressure to scale up the production of defense equipment, companies active in the defense industry struggle to open bank accounts and get loans from banks. In addition to banks’ already intense anti-money laundering and anti-terrorism screenings, defense companies also run up against sustainability rules, Nik Wouters of the broadcaster’s economics editorial team explained.

Specifically, the sustainability rule that banks do no harm with their investments is an issue in this industry. Companies have to prove that the often controversial weapons they make don’t end up in the hands of controversial regimes. And that requires more screening and even more paperwork.

The defense industry is also small and hasn’t grown in recent years, making it relatively unattractive for investments.

The defense company Defenture in Tiel, which makes specialist vehicles for military purposes, is struggling to get between 20 and 50 million euros in funding to scale up its production, Henk van de Scheer told NOS. Defenture considers itself a car manufacturer. But banks argue that they deliver vehicles to soldiers who use them to kill people. “When actually this is about keeping our own peace in order,’ Van de Scheer said.

Van de Scheer and other defense companies have reported the issue to the Ministry of Defense. The Ministry will meet with banks and the industry soon to see if any adjustments can be made to make getting funding easier.

Banks can’t relax their rules that protect against money laundering and terrorism funding, but they can adjust to different industries’ specific quirks. For example, last year, the Dutch banks adjusted their rules to make it easier for sex workers to get a bank account by taking into account that the sector works a lot with cash and sex workers’ income varies a lot.