Independent verification of lending rates across the banking sector necessary -Jobs Committee report

The Committee is concerned about the divergence of opinion between the banks and the small to medium business representative organisations in relation to bank lending. Given these concerns about the reality of the situation on the ground and the fact that opinions on the availability of credit for SMEs are so divergent, the Committee considers that the Central Bank may be the appropriate authority to carry out a study into independent verification of lending rates.

There is an over-reliance on bank loans and overdrafts and the Committee considers that the development of non-banking sector funding initiatives to fund growth in the SME sector should be strongly encouraged.

There is also a need for sector-specific specialists in banks, the report highlighted.

The report makes a total of 25 recommendations. Among the other recommendations are:

•    Mechanisms to restrict the necessity of requesting personal guarantees should be considered.
•    A viable business should not be brought down by the calling in of a previous bad loan.
•    New businesses need to be made aware of all the charges that a bank will impose on them before a bank account is opened or a loan drawn down so that they can budget for them.
•    It should be mandatory for banks to provide detailed written explanations as to why a particular application for credit has been turned down.
•    Loan applications should be dealt with by banks within a specific timeframe and a response should be provided within two weeks at the latest.
•    There must be greater supports for small businesses to improve their financial literacy with particular emphasis on the drafting of business plans.
•    If MicroFinance Ireland is to become a viable vehicle to provide solutions to the revival of the SME sector, restrictions on who it can and cannot lend to must be eased.
•    Consideration should be given to lightening the tax burden on interest made on minor investments in crowdfunding.
•    Credit Unions should have a greater role in local job creation and in supporting SMEs.

Committee Vice Chairman, John Lyons TD said: “Given the importance of SMEs to economic growth and job creation and retention, the Joint Committee on Jobs, Enterprise and Innovation decided to examine the issue of access to finance for SMEs. Our Committee has identified the availability of funding and supports for small and medium sized businesses as a key priority in national efforts to achieve economic recovery. The small and medium sized enterprise sectors are integral and important elements of our economy and if we are serious about our indigenous businesses we need to encourage and help create the best environment for them to operate in. The availability of funding and supports are essential for many small businesses to get up and running, flourish, innovate and expand.

“Following a series of meetings with a wide range of stakeholders to elicit their views, the Committee has today published a report which contains a series of concrete, feasible and actionable recommendations that seek to address the issue of access to finance for SMEs.

“The Committee is fully committed to monitoring the progress being made on the on-going implementation of the recommendations contained in this report, as well as other policy initiatives, in close consultation with those Ministers, Departments, State Agencies and other stakeholders with responsibility for policy in this area.”

The full report can be accessed here.

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Committee Membership

Deputies: Dara Calleary (FF), Áine Collins (FG), Michael Conaghan (LAB), Damien English (FG) (Chairman), Seán Kyne (FG), Anthony Lawlor (FG), John Lyons (LAB) (Vice-Chairman), Peadar Tóibín (SF); Mick Wallace (IND).

Senators: Deirdre Clune (FG), David Cullinane (SF), John Kelly (LAB), Michael Mullins (FG), Feargal Quinn (Ind), Mary White (FF).