Bernard Durkan (Kildare North, Fine Gael)
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70. To ask the Minister for Finance the extent to which he expects lending to business to improve following the setting up of the strategic investment bank; and if he will make a statement on the matter. [42371/14]

Michael Noonan (Limerick City, Fine Gael)
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The Strategic Banking Corporation of Ireland (SBCI) has been established by the Government as a means of ensuring that SMEs in Ireland are provided with sufficient finance for growth. Loan agreements with the international funders, KfW and the European Investment Bank, to the value of €550m have been signed to fund the SBCI during its initial period of operations.

The SBCI is funded to the value of €800m of which €150m is from KfW, €400m from the European Investment Bank and €250 from the National Pension Reserve Fund.

A key benefit of the SBCI will be its ability to facilitate loans with initial capital repayment breaks or the offering of loans with longer durations than are typically available currently. In such cases, SMEs would have greater capacity to make investments on the basis of improved cash flow matching, which makes growth more likely.  Additionally, the expanded pool of lending products could serve the needs of a wider cohort of SME customers than is presently served by lenders in the market. Improved credit products are expected to incentivise demand from SMEs for finance for the growth of their companies.

The SBCI will fund and design product programmes to be distributed through a range of channels of finance companies including traditional banking institutions.  The SBCI will focus on facilitating the funding of new entrants to this market.  By reducing barriers to entry in the SME finance market for new entrants, the SBCI will relentlessly encourage competition thereby improving the quality and range of SME finance available.

Credit is the lifeblood of all businesses and SMEs need to be able to access loans of greater duration, with enhanced terms and potentially at a lower cost facilitated by a state financial institution. KfW and the EIB have provided lower cost funding to the SBCI for up to a 10-year term. Locking in funds at a lower cost for a 10-year period is both a major benefit and a risk mitigant for the SMEs. Bank funding costs could increase for a whole host of reasons and to lock in lower cost funding would be a major benefit in protecting employment in the SME sector in such circumstances. This should provide increased confidence to the SME sector as it increases the certainty around the availability of funding to that sector even in adverse financial market conditions.  This will protect existing employment in the SME sector as well as boosting employment as SMEs will be able to finance investments using new types of lending products that are not available at present.