Business Irish

Sunday 22 April 2018

Government survey to probe SME demand for bank credit

Credit Review Office sought independent analysis

Peter Flanagan

THE Department of Finance is to carry out a survey on small business lending in an effort to determine the real demand for credit from the sector.

The deadline for tenders for an 'SME Credit Survey' passed yesterday, with full details of how the survey will be carried out expected by next week.

The tender notice calls for bids to "conduct a survey, securing completed responses from at least 1,500 SMEs, to ascertain the situation in relation to the demand for credit from SMEs, their level of knowledge on their rights in relation to credit, the reasons given for refusal of credit and the failure of SMEs to seek credit."

The survey will cover the period between April and September this year and is expected to consist of a "reasonable spread" of micro, small and medium-sized enterprises.

A full report based on the survey should be submitted to the department by November 14.

A comprehensive survey on lending levels to small business has been a key demand from the head of the Credit Review Office (CRO) John Trethowan.

Mr Trethowan, who has the final word on credit applications from SMEs that are rejected by Bank of Ireland and Allied Irish Banks, has repeatedly called for an independent survey to be carried out.

"The demand for SME credit remains unmeasured," he said in his last report.


"A recent credible survey in the UK has pointed to a lack of demand for credit there. Until the demand for credit is fully understood, there is little point in some commentators being fixated on the amount of new credit as opposed to restructuring sanctions."

That CRO report showed lending levels had fallen due to a lack of demand from SMEs -- something that was met with derision by small business groups.

"It is obviously impossible to grow new credit in an economy where such credit is not being demanded," he added.

However, Mr Trethowan's office has been routinely criticised by small business groups and has been accused of working too closely with the banks.

But at the other end of the spectrum the 'Quarterly Bank Lending Survey' carried out by small firms group ISME has been dismissed in some quarters as "unscientific" and "skewed" in favour of negative answers.

The last ISME survey, which was released in early September, shows 58pc of SME applications being rejected by the banks.

News of the survey's implementation comes as EU figures show that Ireland has the second highest percentage of unsuccessful SME credit applications in the Union.

The figures reveal that 53.2pc of loan applications were successful in 2010, down from 96.9pc three years ago. Ireland also had the second highest jump in unsuccessful applications over the three-year period.

Some 26.6pc of applications were rejected completely, according to the Eurostat figures, which are based on a poll of 25,000 small firms.

Last night, Mr Trethowan said the EU numbers reinforced the fact that banks had returned to "prudent lending practices".

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