Written answers

Tuesday, 17 January 2017

Department of Finance

Credit Availability

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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351. To ask the Minister for Finance the extent to which he expects to continue to encourage the banking sector to meet the requirements of small and medium sized industry, the retail or commercial sector; and if he will make a statement on the matter. [1978/17]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Government policy is 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. In this regard the Government has developed a number of initiatives to ensure that the supply of credit in the market is sufficient to meet the existing and future needs of SMEs.

As the Deputy if aware, a key objective of the Strategic Banking Corporation of Ireland (SBCI) is to ensure that SMEs can access low cost flexible loans from a variety of sources. The SBCI channels its funds through lending partners known as on-lenders. The SBCI currently has three bank on-lending partners and five non-bank on-lending partners. The SBCI has a current funding capacity of €1.05 billion which it makes available to its on-lending partners as demand from SMEs arises. To the end of September 2016, a total of €458 million has been lent to over 10,600 SMEs and the SBCI has committed a total of €906 million to its eight on-lending partners. In 2017, the SBCI will continue to make significant funding available to SMEs across Ireland. 

Another recent initiative is the €150 million Cash Flow Support Loan Fund for Farmers announced by the Department of Agriculture, Food and the Marine. This fund will provide highly flexible, low interest loans to farming SMEs.

The Microenterprise Loan Fund, administered by Microfinance Ireland, is an additional source of credit that provides loans for up to €25,000 to start-up, newly established, or growing micro enterprises employing less than 10 people.

The Credit Review Office is another government initiative that helps SMEs who have had an application for credit of up to €3 million declined or reduced by the main banks, and who feel that they have a viable business proposition. This is a strictly confidential process between the business, the Credit Review Office and the bank. The Credit Review Office overturns more than 50% of appeals it receives.

The Government remains committed to the SME sector and sees it as the key engine of ongoing economic growth. I can assure the Deputy that my Department, working with other relevant Departments, Bodies and Agencies, such as the Credit Review Office, will continue to advance policies to ensure the availability of both bank and non-bank credit so as to ensure that viable Irish SMEs have sufficient access to finance.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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352. To ask the Minister for Finance the extent to which the banking sector is currently meeting the working capital requirements of the farming community; and if he will make a statement on the matter. [1979/17]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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As the Deputy is aware, supporting SMEs, including those in the farming community, in terms of access to finance has been a cornerstone policy for Government in our efforts to rebuild the economy and bring back jobs. 

In terms of monitoring the working capital requirements for SMEs, my Department commissions biannual surveys to ascertain the demand for credit by SMEs.  This survey series, most recently conducted by Behaviour & Attitudes on behalf of my Department, is the most comprehensive survey of SME credit demand in Ireland, covering 1,500 respondents and involving over 6,000 direct telephone calls to SMEs. SMEs of all sizes trading in all sectors, excluding property development and speculative activities, are included.  The survey covers demand for credit from both bank and non-bank sources.

I would draw the Deputy's attention to the most recently published Department of Finance SME Credit Demand Survey, covering the period April to September 2016, which can be found at www.finance.gov.ie. The results of this survey shows that, when pending applications are excluded, 84% of credit applications to banks were approved or partially approved. Purchases, replacement or lease of new vehicle/equipment is now provided as the main reason for applying for bank finance with 29% stating this is why they requested bank finance. Working capital/cash flow requirements were provided as the second highest reason for applying for bank finance with 27% of respondents stating that they required finance for this purpose.  When asked about sources of finance for working capital, internal funds/retained earnings were the main finance source of working capital with 73% of working capital coming from this source (up 6%).  The survey also showed continued positive trends in terms of trading performance, profitability and employment.

The SME State Bodies Group, chaired by my Department, provides a forum for the development and implementation of policy measures to enhance SMEs' access to a stable and appropriate supply of finance. As the Deputy will be aware, the Action Plan for Jobs over the past number of years has set out a range of commitments to ensure viable SMEs can access appropriate finance at a reasonable cost from both bank and non-bank sources.  These Government policies have supported year on year increases in new lending to the farming sector, as measured by the Central Bank.  

It should be noted that the SBCI have reported that, as at end June 2016, 24% of their loans (by value) were to SMEs operating in the agriculture sector. 

All viable SMEs operating in Ireland should have the opportunity to access sufficient finance to meet their enterprise needs in a manner that supports growth and employment in the economy and the Government remains committed to the SME sector, as reflected in the Programme for a Partnership Government.  Consequently, my Department and the Credit Review Office, working with the other relevant Departments and Agencies, will continue to monitor the availability of both bank and non-bank credit to viable SMEs including those in the farming community.

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