Dáil Éireann Debate, Wednesday - 17 April 2019
76. Deputy Willie Penrose asked the Minister for Finance his plans to support a public banking scheme based on the Sparkasse model due to the continued difficulties in lending volumes to SMEs, particularly in rural areas and the high interest rates charged; and if he will make a statement on the matter. [15648/19]
View answerAs the Deputy is aware, my Department in conjunction with the Department of Rural and Community Development, issued a report on Local Public Banking in Ireland last year. The report concluded that there is not a compelling case for the State to establish a new local public banking system based on the German Sparkassen model in Ireland.
However, a commitment was given in the report that my Department would arrange for an independent evaluation to consider how the objectives of community banking and how the local provision of banking and financial services could be furthered through other delivery mechanisms.
Following a procurement process, the contract was awarded to Indecon earlier this year and work on the independent evaluation is underway.
As regards SME loan volumes, the Department of Finance's SME Credit Demand Survey, which is published biannually, has consistently found a decline in the demand for Bank lending by Irish SMEs. This has fallen from 40% in the initial survey in 2011 to the current level of 20% in the most recent survey, covering the period October to March 2018.
In respect of the issue of the high interest rates charged to SMEs by the Deputy, 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 as these are taken by the board and management of the relevant institution. This includes decisions in relation to product interest rates as determined by the banks from time to time.
It should be noted that in the most recent Department of Finance SME credit demand survey, only 1% of SMEs that did not seek credit stated it was due to it being too expensive to borrow. The same survey notes that four in ten of all SMEs with outstanding debt are not certain of the interest rate attached to their outstanding loans. Of those that are aware, the average cost of credit reported on outstanding loans is 4.4%, down from 5.1% in September 2017.
