Mr. Mark Fielding:

Reference was made to the proposal to establish an SME development fund or bank, for want of a better expression. We know that one of the main objectives of the Government is to secure a financial system for deposits and the flow of credit to consumers and businesses. The Irish banking system, as it stands in early 2014, is not fit for purpose. There is a need for a new and active relevant actor in the business credit area. We have a proposal on the establishment of a State-sponsored SME development fund to support the recovery of the economy. This would work by providing the funding firms are not obtaining in the quantities they require from the existing actors, that is, the two pillar banks and Ulster Bank. At issue are proposals for future development rather than rescue funds or bailing out firms. These are proposals for future-proofing many small businesses. We hope the fund will focus on providing loans and trade finance for Irish businesses.

This would serve to meet the gaps in the market, support the development of SMEs, support export growth and look after the many business owners, including IBRC and Danske customers, who are obliged to refinance their loans.

The main objective of such a fund would be to create Irish wealth which would ultimately create jobs. To that end, it would restrict its activities to the SME wealth creating sector. Subject to the approval of the Department of Finance, we estimate that the fund would initially require in the region of €500 million. As I mentioned, we are finding that many SMEs depend too much on short-term funding. The development fund, on the other hand, would concentrate on repayment periods of up to 20 years, with the possibility of securing fixed interest rates. It would be an instrument of economic policy, majority-owned by the Government and controlled by it. It would offer something similar to what ICC Bank did in the past. Unfortunately, that level of expertise is not as prevalent in the existing banks as it should be, as we keep hearing from entrepreneurs who are talking to their lenders.

In terms of having sympathy for the banks, I, too, have sympathy for them. However, in the surveys we conducted people whose loan applications had been refused gave examples of lenders making the conditions for lending unjustifiably hard such as seeking guarantees of €800,000 for a €60,000 loan or not accepting a €550,000 security against a €100,000 loan. There were instances of repayment capacity being calculated on previous years' cash flow, even though the loan was being sought to purchase stock to fill new orders which would double previous years' turnover. I have more than 100 examples of where the banks did not have the ability to read the proposals put to them.

I accept the point that some SME owners - I would not say the majority - have not done themselves any favour by going in with half-baked proposals. However, I have been dealing with people involved in the sector since the early 1970s and they have not suddenly become numerically illiterate. That argument is being used as an excuse for not giving loans to small businesses. The vast majority of SME owners will have asked their accountant to go over the figures before approaching the bank. There has been no dramatic increase in the numbers going in unprepared and I refuse to accept the banks banging on all the time about SME owners needing to be trained, offering a day-long course to bring them up to the level of an accountant and so on. That is not required. A small business owner running a retail outlet does not need to be an accountant. He or she needs to understand figures, of course, and, in reality, the vast majority of SME owner-managers understand their business and from their till roll and cheque book how the business is doing.

The difficulty at this time is that there is not the same capacity for engagement when small business owners approach their bank manager. There was a time when the bank manager put one through one's paces. He or she was able to read the figures, tell the business owner how good or bad the proposal was and, if necessary, send the applicant off with a flea in the ear and an instruction to return when the proposal was drawn up properly. Now owners go in and meet a blank face, a person who would not know a balance sheet or a profit and loss account from a kick up the transom. The business person is simply told the proposal will be sent upstairs and examined. In the past, by contrast, SME owners, even those who were not using financial advisers and accountants, were still able to get some leverage with the banks because the expertise was available. The expertise is not available as much as it should be.

On crowd funding, we certainly are more than supportive of peer-to-peer lending and Linked Finance. We understand another organisation is just about to come on board, to which we say the more the merrier. In the United Kingdom in 2011 £26.7 million was made available through alternative finance and peer-to-peer lending. Last year that figure had risen to £332 million, an increase of 254%. Just over 5,000 SMEs have raised funding through peer-to-peer lending in the United Kingdom in the past three years, with the total jumping from 550 in 2011 to 3,706 last year. That large jump between 2011 and 2013 was facilitated by the decision by the UK Government to encourage and support peer-to-peer lending. It gave an immediate boost in confidence to people lending into the market.