SBCI will take on more risk to drive up lending to Irish SMEs
The Strategic Banking Corporation of Ireland (SBCI) is to start taking more risk with SME loans.
The State-backed SBCI, which has also received money from the European Investment Bank and German development bank KfW, is developing new products whereby it would share risk with the lenders it uses to channel money to SMEs.
Currently, lenders are responsible for repaying money from the SBCI, regardless of whether the loan to a company goes bad or not. The SBCI was established in October 2014 to provide access to "long-term, patient funding" for SMEs in this country.
SBCI chief executive Nick Ashmore told the Sunday Independent that the SBCI was exploring options with potential partners and would make further announcements in due course.
"Taking on a portion of credit risk is a natural extension of the SBCI's existing activities. We have the capital, the funding capacity and the appetite to do this successfully...this will add to the range of supports we offer SMEs and make it easier for more SMEs to access the funding they need," he said.
He said he envisaged that initially the risk-sharing model would work alongside the credit guarantee scheme, whereby the State guarantees 75pc of the facility made available by a lender to a "viable" SME unable to secure funds under normal lending criteria.
Sharing risk is likely to allow it to attract more lenders on board. The current list of lenders includes AIB, Bank of Ireland, Ulster Bank, and invoice finance provider Bibby Finance.
Earlier last week, Ashmore said that the Brexit vote had made it more difficult to attract new business lenders here.
UK banks which had been looking at expanding operations in Ireland are now "up to their necks in Brexit," and were thus unlikely to launch new initiatives here, he said.
"I don't think we're seeing competition at the level we'd like to see, we'd like to get a new term lender in here," he added.
SBCI statistics released on Thursday put the amount drawn down by SMEs at €347m, up from €172m as of January this year.
The average loan size has gone up to €40,000 from €37,000 in December, with the largest individual loan worth €4m. Over 8,500 SMEs have borrowed SBCI money.
"Since the SBCI began lending to SMEs in March 2015, the pace of SBCI loan drawdowns has grown steadily as it has expanded its range of on-lending partners and product types...in parallel we've seen a growth in new lending in the SME sector and a drop in interest rates for larger SME loans," Ashmore said.
Sunday Indo Business