The Deputy can be assured a key strategic priority for me and my Department is a well regulated, sustainable banking and financial services sector. This includes that 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. That is why my Department has a range of measures in place to support viable SMEs to access appropriate finance at a reasonable cost from both bank and non-bank sources.
At a time of heightened economic volatility, State backed risk sharing and guarantee programmes will continue to be a relevant policy option. In particular, I would like to draw your attention to some of these.
The Strategic Banking Corporation of Ireland (SBCI) launched the Ukraine Credit Guarantee Scheme (UCGS) in March 2023. The UGCS provides €1.2 billion of low-cost, unsecured working capital for Irish SMEs, small Mid-Caps, and primary producers affected by rising costs of energy following the Russian invasion of Ukraine.
In order to qualify, the borrower is required to declare that their costs have increased by a minimum of 10% on their 2020 figures and that the loan is being sought specifically as a result of difficulties being experienced due to the Ukraine crisis.
No personal guarantee or collateral is required for loans up to €250,000. Loan facilities (including overdrafts, working capital and term loans) of €10,000 to €1 million will be available; with payback period of up to 6 years. Loans under the UGCS also benefit from reduced interest rates vis-à-vis standard market rates.
Bank of Ireland, Allied Irish Bank, Capitalflow and three Credit Union Groups (Metamo, Credit Union Development Association (CUDA) and Irish League of Credit Unions (ILCU) currently lend under the UGCS scheme.
The SBCI also recently launched its €500 million Growth and Sustainability Loan Scheme (GSLS). This scheme will facilitate strategic investment by SMEs, including farmers and fishers, in growth, resilience and climate action, to support their continued viability and sustainability, and increase their productivity and competitiveness.
The GSLS aims to be an accessible source of low-cost finance for SMEs. Loans under the GSLS are available from €25,000 to €3 million, with up to €500,000 available unsecured. The scheme is underpinned by a counter-guarantee from the European Investment Fund with support from the Departments of Enterprise, Trade and Employment and Agriculture, Food and the Marine.
At least 30% of the scheme’s lending capacity is directed towards climate action and environmental sustainability, recognising that it is crucial that SMEs, including farmers, play their part in Ireland’s sustainable transition, and demonstrating the Government’s support for this goal. Loans under this strand will benefit from a further ‘green’ interest rate discount.
Such loans include investment in green/sustainable measures, any investment by SMEs classified as a Green/Sustainable Enterprise, and any investment by farmers classified as a holder of a Green Eco Label. The remaining 70% of the lending volume is targeted for investment in business growth and resilience.
Bank of Ireland and AIB are currently accepting applications under the GSLS and more on-lenders are expected to join this scheme in the near future.
These schemes followed in the footsteps of a range of other successful products made available by the SBCI to SMEs.
As Minister of Finance, I have no direct function in the relationship between banks and their customers nor in relation to the banking decisions made by individual lending institutions. However, measures are in place to address circumstances such as the ones you raise.
In relation to businesses refused credit, the Credit Review (www.creditreview.ie) was established to assist those SMEs and farm borrowers that have had credit applications of up to €3 million refused, or an existing credit facility withdrawn or amended by the participating bank. SMEs can apply to Credit Review after exhausting the internal appeals process in the participating institution, which are currently AIB, Bank of Ireland and PTSB.
Credit Review received 1,275 formal applications by the end of 2022. Of these, 922 have reached a final conclusion, with Credit Review upholding appeals in favour of 543 borrowers, including those with a commitment to reassess the lending in the future if agreed performance hurdles are met in the short term. The upheld appeals resulted in EUR 77.4 million in credit being made available to SMEs and farms.
In addition, the Central Bank of Ireland has a number of measures in place to specifically protect and support the interests of businesses. Banks must follow regulations set out in the Central Bank’s Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-sized Enterprises) Regulations 2015 (the SME Regulations).
The SME Regulations (centralbank.ie/news/article/regulations-for-firms-lending-to-smes-from-2016) set out the required treatment of SMEs by regulated entities in relation to various aspects of business lending. This includes detailed provisions around the credit application process, requirements regarding security or collateral, credit refusals and withdrawals, handling complaints, managing arrears and having in place policies for engaging with SMEs in financial difficulty.
