Lorraine Higgins (Labour) | Oireachtas source

I am leading the Order of Business today on behalf of the Labour Party leader, Senator Ivana Bacik. I want to highlight an issue of utmost importance to the country and its recovery, which relates to the banking system and the SME sector. The latest news from the Department of Finance is that 24% of SMEs who were refused finance were not given reasons. Almost half of all applications take 15 days or longer to turn around. The period of 15 days was indicated by the Government as acceptable but, unfortunately, the banks are in flagrant disregard of our directions. This makes me fear for a lost decade in Irish society. It must be adequately addressed so that we do not have continuing deep-seated problems with regard to this sector. The SME sector makes up 99% of businesses in Ireland yet the loan rejection rate, at 24%, is second only to Greece in the eurozone. We also have the second highest level of discouraged borrowers. If SMEs are lucky enough to get finance, they have the worst terms and conditions of all EU member states.

We must compare SME lending Ireland to best practice in the western world. Bank lending in most First World countries is based on cash flow rather than bricks and mortar security, as was the case in Ireland and continues to be so. We have gone through a property crash and bricks and mortar security is not a proper basis on which to proffer loans. AIB and Bank of Ireland gave an undertaking that they would allocate ¤3.5 billion worth of lending to the SME sector in 2012. However, it seems we have been duped in this regard because in their calculations the banks include restructuring, renewal of seasonal loans, renewal of overdraft facilities and all agricultural, retail and service loans for their interpretation of SME lending. This will not help Ireland and its economy to recover. We need proper banking competition. We must look at what happened in England recently, with Metro Bank being granted a new licence so that it could lend almost half of its capital to the SME sector. We need to do this because we need to target entrepreneurs and Irish businesses and ensure they can continue despite the recession. We will not be able to rebuild Ireland unless we have a thriving SME sector. It is critical to economic development. I would like to invite the Minister for Finance to the House to discuss lending and the SME sector.