Written answers

Wednesday, 1 April 2015

Department of Finance

Credit Availability

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

17. To ask the Minister for Finance his views on the European Commission staff working document (2015, 27 final) - Country Report Ireland 2015, which states that lending to Irish businesses declined by 8.1% year-on-year in October 2014 while interest rates for new corporate loans of up to €1 million to small and medium enterprise are higher in Ireland than in most other countries in the euro area; and if he will make a statement on the matter. [12093/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

While the data contained in the European Commission Staff Working Document referred to by the Deputy pertains to stock of lending in the first two quarters of 2014, a more relevant barometer of funding activity is the level of new lending to the SME sector. The most recent Central Bank statistical release entitled "Trends in Business Credit and Deposits, Q4 2014", published last week, shows that gross new lending to non-financial, non-property related SMEs amounted to almost €2.4 billion over 2014; this was just over 25 per cent higher than 2013 as a whole. However, repayments continue to outpace new lending and outstanding credit to SMEs continued to decline in both annual and quarterly terms.

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 from a diverse range of bank and non-bank sources.

My Department has been involved in a range of initiatives to encourage access to credit for small and medium sized businesses, and the SME State Bodies Group provides a forum for the development and implementation of policy measures to enhance SMEs' access to a stable and appropriate supply of finance. 

One such policy measure is the Strategic Banking Corporation of Ireland, whose goal is to ensure access to flexible funding for Irish SMEs by facilitating the provision of:

- Flexible products with longer maturity and capital repayment flexibility, subject to credit approval;

- Lower cost funding to financial institutions which is passed on to SMEs;

- Market access for new entrants to the SME lending market, creating real competition.

Each of these elements create a more competitive and dynamic environment for SME funding. The SBCI is a vital new part of the country's financial architecture. By taking a fresh approach to funding SMEs in Ireland, the long-term potential of the sector to drive economic growth and job creation will be actively supported.

The Central Bank "Retail Interest Rate Statistics: January 2015" shows that the weighted average interest rate on new NFC loans up to €1 million stood at 5.09 per cent at end-January, 210 basis points above the euro area rate.However, it should be noted that in the most recent SME credit demand survey covering the six month period to September 2014, only 1% of SMEs that did not demand credit thought that it was too expensive to borrow. In addition, the lower cost funding by the SBCI should act as a catalyst for downward pressure on interest rates by fostering greater competition in the marketplace.

Comments

No comments

Log in or join to post a public comment.