Written answers

Wednesday, 28 April 2010

Department of Finance

Small Business Finance

Photo of Jan O'SullivanJan O'Sullivan (Limerick East, Labour)
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Question 101: To ask the Minister for Finance if he will comment on the current small and medium enterprise lending environment; his views on proposals which would ameliorate this lending environment; the discussion he has had with the Department of Enterprise, Trade and Employment regarding the possibility of implementing an SME working capital loan guarantee scheme; the level of funding that is to be allocated to any such scheme for 2010 and 2011; and if he will make a statement on the matter. [17213/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The third Mazars report on lending to SMEs, which covers the period from October to December 2009, was published last week. The report showed that credit applications in number and value terms rose slightly in the last quarter of 2009 over the previous quarter, which is encouraging. The level of applications for credit would appear to be stabilising and Mazars also reported a small improvement in the overall credit approval rate. However, the reduction in the stock of credit, as repayments exceed new credit, and in credit quality reported by the banks remains a concern for the Government. To address this concern, I announced earlier this month that AIB and Bank of Ireland are to make available a minimum of €3 billion each for new or increased credit facilities, including working capital targeted at SMEs, in the real economy in each of the next two years.

The recently established Credit Review Office is available to review banks' decisions to refuse credit to small and medium enterprises (SMEs). It will provide an independent opinion of the banks' decisions on whether the credit should have been granted or not. SMEs can also seek a review of a decision to reduce or withdraw credit. In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks in respect of SMEs. This will help me to decide what further action might be necessary to secure the flow of credit. I intend to publish the analysis from the review process so that the performance of the banks participating in NAMA will be clear to all.

Work is underway within the Department of Enterprise, Trade and Employment on the examination of a possible scheme of loan guarantees and my officials have held a number of discussions with officials of that Department on the subject. Key concerns being addressed include the extent to which such a scheme would increase lending to SMEs (as against enhancing security for the banks) and the extent of taxpayer exposure and I understand that the work is nearing completion.

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