Dara Calleary
Question:15. Deputy Dara Calleary asked the Minister for Finance the manner in which he believes a State enterprise bank can help boost employment in the country; and if he will make a statement on the matter. [23791/14]
View answerThursday, 3 July 2014
Questions (15)
Written answers
Credit is the lifeblood of all businesses and SMEs need to be able to access loans of greater duration, with enhanced terms and potentially at a lower cost facilitated by a state financial institution. A state promotional institution is a well established business model that is beneficial and successful in other markets. An Irish SME focused institution would promote greater competition in the small business lending sector while also driving economic growth and job creation in the economy.
In this context, the Government, on Tuesday 20 May 2014, announced that over €500 million in additional credit will be made available to Irish SMEs through the establishment of the Strategic Banking Corporation of Ireland (SBCI). Similar to manner in which KfW operates in Germany, the SBCI, as a wholesale lender, will lend to on-lenders, who will then lend direct to SMEs.
A key benefit of the SBCI will be its ability to facilitate loans with initial capital repayment breaks or the offering of loans with longer durations than are typically available currently. In such cases, SMEs would have greater capacity to make investments on the basis of improved cash flow matching, which makes growth more likely. Additionally, the expanded pool of lending products could serve the needs of a wider cohort of SME customers than is presently served by lenders in the market.
KfW and the EIB have indicated that they are willing to provide lower cost funding to the SBCI for up to a 10-year term. The NPRF will also fund the SBCI. Locking in funds at a lower cost for a 10-year period is both a major benefit and a risk mitigant for the SMEs. Bank funding costs could increase for a whole host of reasons and to lock in lower cost funding would be a major benefit in protecting employment in the SME sector in such circumstances. This should provide increased confidence to the SME sector as it increases the certainty around the availability of funding to that sector even in adverse financial market conditions. This will protect existing employment in the SME sector as well as boosting employment as SMEs will be able to finance investments using new types of lending products that are not available at present.
The Government is prioritising the passage of the required legislation through the Houses of the Oireachtas and I expect the SBCI to be facilitating lending before the end of the year.