Monday 19 February 2018

Treatment of SMEs by banks is 'horrific', Dáil told

Fianna Fáil's John McGuinness. Photo: Tom Burke
Fianna Fáil's John McGuinness. Photo: Tom Burke

Sean Duffy

The treatment of small and medium businesses by the banks has been "horrific", an Oireachtas Committee has been told.

Fianna Fáil Deputy John McGuinness said it was "extremely difficult" for the SME sector to get capital from the banks.

Mr McGuiness was responding to the Minister for Finance Michael Noonan, who said conditions for lending to the sector were improving.

"There is an upward trend in application numbers and new money lending by both banks." (AIB and Bank of Ireland)," Mr Noonan said.

The minister added that the approval rates for SMEs were "now averaging 89pc".

Mr McGuinness disputed Mr Noonan's figures, saying: "There's lies, damned lies and statistics. While these statistics look good, the actual experience with the SME sector in dealing with the banks is nothing short of horrific. It is extremely difficult to get to grips with what the banks require - it's extremely difficult to get money for the SME sector out of those banks".

Irish Small and Medium Enterprises Association (ISME) chief executive Mark Fielding told the Irish Independent that the situation has improved, but not to the extent that the Government believes.

"It is a hard slog to be honest, getting to sit down with a bank official," Mr Fielding said. "Everything now is done by computer. So we have a situation where the 'slow no' is wasting time and stopping SME's from seeking alternative sources of finance."

Mr Fielding said that while refusal rates from banks have come down, the waiting period is squeezing businesses.

"The average wait is seven weeks, although I have some people that could be waiting 10 to 15 weeks."

Criticisms were also levelled at the Strategic Banking Corporation of Ireland (SBCI), which was set up to assist small businesses.

Speaking about the SBCI, Mr McGuiness, chairman of the Dáil committee, said "when that fund is attempted to be accessed - mainly through AIB - they can refuse to give the money but they don't necessarily tell why they don't give the money".

Alternative sources of funding are increasingly popular for Irish SMEs, with State-owned lender Micro Finance Ireland (MFI) announcing earlier this month that it would cut interest charges on its loans in July by 1pc.

MFI provides loans of between €2,000 and €25,000.

The future of the Government's role in the country's main banks was also under scrutiny during the session, but Mr Noonan insisted the State was under no pressure to sell its stake in any of the lenders.

"We won't sell more than 25pc of any bank for a certain period of time.

"We said we wouldn't sell the shares at the back end of this year, that we were more likely to do it in the first six months of next year. Everybody knows that circumstances can change and strategies can change," he said.

Irish Independent

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