Access to finance for SMEs was a key aspect of the Action Plan for Jobs 2013 and will continue to be the focus of Government policy in this area in 2014. It is the Government’s vision that all viable businesses 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.
The Government has imposed SME lending targets on AIB and Bank of Ireland for the three calendar years, 2011 to 2013. Each bank was required to sanction lending of at least €3 billion in 2011, €3.5 billion in 2012 and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks achieved their 2011 and 2012 targets.
AIB and Bank of Ireland are expected to lend to viable businesses both for investment and working capital purposes. The Credit Review Office is available to assist businesses which have been refused credit. The recent CRO report shows that the Credit Review Office upheld the credit appeal in 150 cases or 55% of cases decided. The upheld appeals have resulted in €18.5m in credit being made available to SMEs and farms, protecting 1,521 jobs. In the recent Budget I increased the CRO appeals threshold from €500,000 to €3 million and I would strongly encourage SMEs refused credit to seek a review by the Office.
The Government has taken a number of actions to improve the situation in relation to credit availability to SMEs. The range of credit options available to SMEs now include the Microenterprise Loan scheme which can facilitate up to €40million in additional lending to microenterprises over the next five years. In addition, the Credit Guarantee Scheme is designed for SMEs who, because of lack of collateral or because of the specialised sector they operate in, face difficulties in accessing bank credit.
The SME State Bodies Group develops key policy initiatives to support SME access to credit and other forms of finance and ensures their implementation through the annual Action Plan for Jobs. It has continued in 2013 to engage intensively in proactively addressing issues associated with SME funding and financing in conjunction with the relevant stakeholders through the SME Funding Consultation Committee. My officials also meet frequently with additional stakeholders who wish to contribute to policy development in relation to access to finance.
It is vital that the banks continue to make credit available to support economic recovery. However, it is not in the interest of the banks, businesses or the economy for finance to be provided unless the business is viable and has the capacity to meet the interest payments and repay the sum borrowed.
Competition in the mortgage market is a good thing for Irish customers. The decision by a mortgage provider on what credit products to offer is a commercial decision for the lending institution concerned. It is important that each lending institution is allowed to assess properly and independently the risks that it is considering when making such a decision. Mortgage lending decisions must be undertaken on a sustainable and prudential basis by financial institutions and conform fully to the regulatory requirements, both in relation to the financial institution itself, and also with regard to the safeguarding of the borrower's interests.
There is a consensus amongst industry commentators that there may be an emerging supply shortage in the Greater Dublin Housing market which is leading to an increase in property prices and rents across the area. A higher demand for houses in Dublin is not surprising considering the concentration of employment and the need to meet the rising demand for rental accommodation. The Central Bank has advised me that it does not set the credit lending policies of individual banks. In a supervisory capacity, the Central Bank oversees and reviews Bank practices and regulatory adherence. Available information on new mortgage lending activity is published by the Irish Banking Federation on a quarterly basis and this demonstrates that while recent increases in lending is evident, long term mortgage lending is at a low ebb.
