Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

292. To ask the Minister for Finance the extent to which he continues to use his influence with the banking sector to ensure the availability of adequate working capital, particularly for the small and medium sized business sector; and if he will make a statement on the matter. [33370/15]

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

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

Having completed a process of deleveraging, both AIB and Bank of Ireland are now concentrating on growing their balance sheets.In this context, both banks recognise the need to increase business lending in the period up to 2016, including lending to the SME sector.  My Department collates and examines, on a monthly basis, granular data on the funding of the activities of SMEs from both AIB and Bank of Ireland, the wider banking sector and increasingly the non-bank funding sector. In addition, AIB and Bank of Ireland meet my officials on a quarterly basis to keep them abreast of issues pertaining to the SME sector. This facilitates the Department and the Credit Review Office in monitoring progress against agreed annual SME lending plans and ensuring that new lending to SMEs continues to increase as a percentage of total sanctioned lending.I will keep this area under close scrutiny to ensure that the SME sector can access an adequate flow of credit to support the recovery of the economy.

The SME State Bodies Group chaired by my Department are responsible for the Finance for Growth commitments in Action Plan for Jobs.  In 2014, there was strong emphasis on broadening the range of bank and non-bank finance mechanisms available to SMEs.  The APJ 2014 included an integrated action plan that included a series of measures designed to;

- Increase new lending

- Increase participation in Government sponsored initiatives

- Develop new sources of funding

- Increase awareness of Government measures and initiatives to support SMES and

- Enhance the financial capability of SMEs.

In seeking to build on the progress to date and to maximise the benefits to SMEs of the evolving financial landscape in Ireland the focus in 2015 has been to implement a series of actions in the following areas:

- Support and influence the effective implementation of major policy initiatives to ensure that the maximum benefits are afforded to SMES

- Continue to raise awareness and understanding amongst SMEs and entrepreneurs of the full suite of State business supports that are available

- Ensure that the LEO network is a key conduit in providing information, support and advice to small businesses on access to finance issues and strengthen the linkages between enterprise capacity building, accessing finance and business guidance

- Deepen our engagement with international funding institutions

- Facilitate and support the development of a more diverse range of financing options for SMEs

The Government's aim for the Strategic Banking Corporation of Ireland (SBCI) is for it to enhance the range and profile of SME finance providers in Ireland. The SBCI has been established to last into the long term and has been mandated to consider the needs of the SME sector in particular in all of its affairs. Already the SBCI's partnership with AIB has resulted in a 2% reduction in that bank's standard interest rate offering to SMEs.From 9 March to the end of June, some €44.6 million across 1,626 SBCI loans have been extended to the SME market.

The average loan size is €27,500.  The SBCI will continue to work with existing and new providers to develop specific funding products for the needs of SMEs and will also support new entrants to the SME funding markets so as to increase competition and enhance choice. The SBCI is currently in discussions with other banks and a number of non-bank providers of finance to provide products such as invoice discounting, leasing and asset based finance in order to broaden the funding options available to the SME sector and to support those providers with SBCI monies.

The Credit Guarantee Scheme encourages additional lending to small businesses by offering a partial Government guarantee to banks against losses on qualifying loans to eligible SMEs.  The Department of Jobs, Enterprise and Innovation and my Department have worked on an amendment to the existing guarantee scheme to provide funding to SMEs whose banks are exiting the Irish market. My colleague, the Minister for Jobs, Enterprise and Innovation, will shortly bring legislation to the Oireachtas which will enable the development of a more flexible Credit Guarantee Scheme with longer duration and more products and providers included.

The Microenterprise Loan Fund, administered by Microfinance Ireland, provides loans of up to €25,000 to small businesses who have been refused credit by commercial banks. Microfinance Ireland works in partnership with the Local Enterprise Offices nationally to administer this fund. This scheme is currently being reviewed by the Department of Jobs, Enterprise and Innovation with a view to making proposed changes to enhance its effectiveness.

The Credit Review Office helps SME or Farm borrowers who have had an application for credit of up to €3 million declined or reduced by either Bank of Ireland or Allied Irish Banks, and who feel that they have a viable business proposition.They also examine cases where borrowers feel that the terms and conditions of their existing loan, or a new loan offer, are unfairly onerous or have been unreasonably changed to their detriment.This is a strictly confidential process between the business, the Credit Review Office and the bank. The Credit Reviewer, John Trethowan and his team, have overturned 55% of the refusals that have been appealed to the Office.  Further details are available at .

The Government remains committed to the SME sector and sees it as the key engine of ongoing economic growth.  Consequently the Department of Finance, working with the other relevant Departments and Agencies, will continue to monitor the availability of both bank and non-bank credit with a view to taking appropriate actions as warranted to ensure that SMEs in Ireland have the opportunity to reach their full potential in terms of growth and employment generation.