Written answers

Thursday, 23 November 2017

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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72. To ask the Minister for Finance the way in which the costs of credit here compare with such costs throughout Europe, with particular reference to the need to ensure that industry here is able to compete; and if he will make a statement on the matter. [49791/17]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The Deputy will be aware that I, as Minister for Finance, 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.

However, it should be noted that interest rates are in a downward trajectory throughout the EU including Ireland as evidenced in the most recent joint European Commission/European Central Bank Survey on the access to finance of enterprises (SAFE) October 2016 to October 2017.  The EU average interest rate decreased from 3.8% in 2016 to 3.4% in 2017 while Ireland’s interest rate decreased from 5.9% in H1 2016 to 5% in H1 2017. 

It should be noted that cost of credit is only one of several factors affecting competitiveness of SMEs. Furthermore, it is only one of a number of reasons why SMEs decide to seek finance. The most recent published Department of Finance SME Credit Demand Survey, covering the period October 2016 to March 2017, reports only 1% of the SMEs that did not seek credit stated this was because it was too expensive to borrow. The same survey also showed that, among those SMEs with outstanding loans, the average claimed cost of credit across all outstanding loans was 3.6%, down from 4.8% in March 2016.

In the latest Central Bank of Ireland report on Trends in Business Credit and Deposits, the total weighted average interest rate on new non-financial SME loan draw-downs during Q2 2017 was 4.05 per cent. In contrast, the existing stock of Irish SME loans carry a lower weighted average interest rate; recorded at 3.20 per cent at end-Q2.  

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.

This year, to address the challenges posed to SMEs by Brexit, the Government recently announced a Brexit Loan Scheme, which will provide affordable working capital financing to SMEs and small mid-caps that can demonstrate that they are either currently impacted by Brexit or will be in the future. This Scheme will be delivered by the Strategic Banking Corporation of Ireland through commercial lenders and will serve to get much-needed working capital into Irish businesses. The Scheme will make up to €300 million available to businesses of up to 499 employees, and will be open to both clients of State Agencies and businesses with no relationship with State Agencies.

The Government is also considering the development of a Business Advisory Hub which would assist SMEs to make informed funding/investment decisions to help them avail of existing State supports or private market solutions.

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