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Credit Availability

Dáil Éireann Debate, Wednesday - 5 July 2017

Wednesday, 5 July 2017

Questions (92, 93, 94)

Bernard Durkan

Question:

92. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the availability of working capital is being addressed with particular reference to the needs of SMEs; and if he will make a statement on the matter. [31764/17]

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Bernard Durkan

Question:

93. Deputy Bernard J. Durkan asked the Minister for Finance if lending institutions are making adequate credit available to the farming community in view of the pivotal role of the agrifood sector; and if he will make a statement on the matter. [31765/17]

View answer

Bernard Durkan

Question:

94. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which commercial banks are meeting the credit requirements of the agricultural and business sectors; and if he will make a statement on the matter. [31766/17]

View answer

Written answers

I propose to take Questions Nos. 92 to 94, inclusive, together.

As the Deputy is aware, supporting SMEs, including those in the agricultural and business 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. 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.

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 October 2016 to March 2017, which can be found at www.finance.gov.ie. The results of this survey show that, when pending applications are excluded, 88% of credit applications to banks were approved or partially approved. Working capital/cash flow requirements are provided as the main reason for applying for bank finance with 31% stating this is why they requested bank finance. Expansion requirements were provided as the second highest reason for applying for bank finance with 23% 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 78% of working capital coming from this source (up 5%). The survey also showed that the number of businesses reporting a profit has increased for the fourth year in a row, and a higher proportion of SMEs than ever are pursuing a growth strategy. 

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.

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 2016, a total of €544 million has been lent to over 12,593 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. 

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 microenterprises 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 lenders decisions in the 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.

Question No. 95 answered with Question No. 85.
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