Update: Small and Medium Enterprises, 24th June 2015

QUESTION NO:   266

DÁIL QUESTION addressed to the Minister for Finance (Deputy Michael Noonan)

by Deputy Bernard J. Durkan

for WRITTEN ANSWER on 23/06/2015  

  To ask the Minister for Finance the extent to which lending institutions are encouraged to offer facilities to small and medium enterprises, in line with the requirements of the sector; and if he will make a statement on the matter.

REPLY.

This Government recognises that small businesses play a central role in the sustainable recovery of the Irish economy. To facilitate this, Government policy since 2011 has been focused on ensuring that all viable SMEs have access to an appropriate supply of credit facilities from a diverse range of bank and non-bank sources.

Having completed a process of deleveraging, both AIB and Bank of Ireland are now concentrating on growing their balance sheets.     In this context, both banks recognise the need to increase business lending in the period up to 2016, including lending to the SME sector.   My Department collates and examines, on a monthly basis, granular data on the funding of the activities of SMEs from both AIB and Bank of Ireland, the wider banking sector and increasingly the non-bank funding sector. In addition, AIB and Bank of Ireland meet my officials on a quarterly basis to keep them abreast of issues pertaining to the SME sector. This facilitates the SME State Bodies Group and the Credit Review Office in monitoring progress against agreed annual SME lending plans and ensuring that new lending to SMEs continues to increase as a percentage of total sanctioned lending.     I will keep this area under close scrutiny to ensure that the SME sector can access an adequate flow of credit to support the recovery of the economy.

The Government’s aim for the Strategic Banking Corporation of Ireland (SBCI) is for it to enhance the range and profile of SME finance providers in Ireland. The SBCI will develop specific funding products for the SME lending market. The SBCI has also been established to last into the long term and has been mandated to consider the needs of the SME sector in particular in all of its affairs. Already the SBCI’s partnership with AIB has resulted in a 2% reduction in that bank’s standard interest rate offering to SMEs. The SBCI will continue to work with existing and new providers to develop specific funding products for the needs of SMEs and will also support new entrants to the SME funding markets so as to increase competition and enhance choice. The SBCI is currently in discussions with other banks and a number of non-bank providers of finance to provide products such as invoice discounting, leasing and asset based finance in order to broaden the funding options available to the SME sector and to support those providers with SBCI monies.

The Credit Guarantee Scheme encourages additional lending to small businesses by offering a partial Government guarantee to banks against losses on qualifying loans to eligible SMEs.   The Department of Jobs, Enterprise and Innovation and my Department have worked on an amendment to the existing guarantee scheme to provide funding to SMEs whose banks are exiting the Irish market. My colleague, the Minister for Jobs, Enterprise and Innovation, will shortly bring legislation to the Oireachtas which will enable the development of a more flexible Credit Guarantee Scheme with longer duration and more products and providers included.

The Microenterprise Loan Fund, administered by Microfinance Ireland, provides loans of up to €25,000 to small businesses who have been refused credit by commercial banks. Microfinance Ireland works in partnership with the Local Enterprise Offices nationally to administer this fund. This scheme is currently being reviewed by the Department of Jobs, Enterprise and Innovation with a view to making proposed changes to enhance its effectiveness.

The Credit Review Office helps SME or Farm borrowers who have had an application for credit of up to €3 million declined or reduced by either Bank of Ireland or Allied Irish Banks, and who feel that they have a viable business proposition.     They also examine cases where borrowers feel that the terms and conditions of their existing loan, or a new loan offer, are unfairly onerous or have been unreasonably changed to their detriment.     This is a strictly confidential process between the business, the Credit Review Office and the bank. The Credit Reviewer, John Trethowan and his team, have overturned 55% of the refusals that have been appealed to the Office.   Further details are available at www.creditreview.ie

The Government remains committed to the SME sector and sees it as the key engine of ongoing economic growth.   Consequently the Department of Finance, working with the other relevant Departments and Agencies, will continue to monitor the availability of both bank and non-bank credit with a view to taking appropriate actions as warranted to ensure that SMEs in Ireland have the opportunity to reach their full potential in terms of growth and employment generation.