Peadar Tóibín (Meath West, Sinn Fein)
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16. To ask the Minister for Finance the steps he will take to reduce the cost of credit to small and medium enterprises, and to fix the broken flow of credit from State-created credit facilities. [41755/15]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy will be aware that in my role as Minister for Finance I have no direct function in the relationship between the banks and their customers. I have no statutory function in relation to the banking decisions made by individual lending institutions at any particular time and these are taken by the board and management of the relevant institution. This includes decisions in relation to product interest rates as determined by the banks from time to time. 

In the latest Central Bank of Ireland report on Trends in Business Credit and Deposits: Q3 2015,  interest rates charged on new drawdowns by non-financial, non-property related SMEs was 4.78% during Q3 2015, a 16 basis point decline from the previous quarter. 

In addition, it should be noted that in the most recent Department of Finance SME credit demand survey, covering the six month period to September 2015, only 1% of SMEs that did not demand credit thought that it was too expensive to borrow. The same survey notes that, among those SMEs with outstanding loans, the average claimed cost of credit across all outstanding loans is 4.7%. 

The Strategic Banking Corporation of Ireland ensures 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, increasing competition.

To September 2015, in the first 7 months of the SBCI's operation, €110 million was loaned to c.3,200 SMEs by AIB and Bank of Ireland, with broad coverage across various business sectors and regions.  Each on-lender is contractually obliged to pass on the full financial advantage of the SBCI's funding, thereby reducing the cost of credit to SMEs and creating additional competition in the SME credit market.  In Q4 2015 the SBCI signed an agreement with two non-bank on lending partners, Finance Ireland and Merrion Fleet Management, who provide a range of lower cost financing solutions including vehicle leasing for SMEs. Lower cost funding by the SBCI should act as a catalyst for downward pressure on interest rates by fostering greater competition in the marketplace. The Credit Guarantee Scheme and the Microfinance Loan Fund also play an important role in this regard.