Study Demonstrates Why Banks Are One Of The Biggest Winners Of Legalization
The banking industry and the cannabis industry have a complicated relationship due to prohibition laws. Cannabis businesses have more options for financial services than they have in the past, however, many members of the global cannabis industry still rely on cash-only models and/or struggle to find loans to scale their businesses.
Cannabis businesses are not the only ones harmed by the lack of banking access for the emerging legal cannabis industry. A recent analysis by Whitney Economics (WE), CTrust, and Green Check demonstrates how much profit potential banks are missing out on by not working properly with cannabis businesses.
“A first-of-its-kind report released today projects that the U.S. cannabis industry will need between $65.6B and $130.7B in sustainable growth capital to support new cannabis businesses and help refinance existing ones over the next decade, generating approximately $1.0 billion to $2.4 billion in potential interest revenue for financial institutions willing to lend to cannabis businesses.” stated the authors of the report.
While the financial analysis report is focused on the United States, many of the same findings can be adapted and applied to every other jurisdiction on earth that still hinders or outright prohibits accredited banks from working with the cannabis industry.
“The report also shows that U.S. cannabis retail sales are forecasted to grow from $28.8 billion in 2023 to $87.0 billion by 2035. To support that growth, the U.S. cannabis industry could add 25,000 to 30,000 licenses to roughly 40,000 current licensees—a near doubling of potential lending and interest revenue opportunities for banks.” the authors also stated about their report.
“The funding needed to realize this growth cannot be supported solely by friends and families,” said Beau Whitney, WE founder and chief economist. “By demonstrating regional opportunities and broader market potential, the report aims to empower financial institution lending departments to help educate their boards on risks, rewards and opportunities—all in the hopes of accelerating the industry’s growth by encouraging more financial institutions to participate”
“Banks have long been cautious about entering the cannabis industry due to regulatory and financial risks, though when they do, they have to rely on non-cannabis specific underwriting and due diligence,” said Dotan Y. Melech, CEO and co-founder of CTrust. “This report should pave the way for conversations with financial institutions to develop more informed lending partnerships with the cannabis industry.”
Legal cannabis companies should be afforded the same access to the world’s financial systems that other large legal industries are afforded. As more countries get on the right side of history and modernize their cannabis policies, momentum will continue to build and hopefully comprehensive global reform will be achieved soon.
