The latest ISME Quarterly Bank Watch Survey, issued today, has shown that despite the positive indicator that demand for bank finance for SMEs has increased to 37%, the level of actual refusals remains at a high 50% in the last three months. ISME says that this clearly demonstrates that credit conditions in Ireland are tougher than anywhere else in the euro area, despite the continuous false assertions by the Irish Banking Federation and the individual banks.
More than 900 firms took part in Isme’s quarterly bank watch survey, conducted last week. Some 92% stated the Government was having either a negative or no impact on SME lending.
According to ISME Chief Executive, Mark Fielding, “The results of today’s survey gives a lie to the banks’ excuses that demand for credit from SMEs is weak. It also confirms the evidence of the recently published Central Bank report and the EU Survey on Access to Finance in the Euro area**, which stated that Irish SMEs were second least successful, after Greece, in obtaining Bank finance. It is obvious that the Government’s instructions to the bailed out banks to increase access to finance for viable SMEs is being ignored”.
• 50% of companies who applied for funding in the last three months were refused credit by their banks, a slight improvement on the 52% in the previous quarter.
• 37% of respondents had requested additional or new bank facilities in the last 3 months, up slightly from 36% in the previous quarter and showing a large increase from the 25% in the same quarter of 2011.
• 91% of firms who applied for funding outlined that the banks are making it more difficult for them to access finance. (66% of total respondents)
• 89% of respondents are customers for over 5 years, while 40% are over 20 years.
• Of the 50% approved for funding, 66% have drawn down the finance either fully or in part; an increase from the 57% in the final quarter of 2011.
• 50% of requests were for changes to overdrafts, with 53% for changes to term loans.
• 92% state that the Government was having either a negative or no impact on SME lending.
• 42% of those SMEs who had other changes in their bank facilities in the last three months were reduction in overdrafts.
• 39% experienced an increase in charges and 22% an increase in their interest rate.
• 54% of respondents were micro businesses, 37% small and 9% were medium enterprises.
“The Government must take immediate action and insist on TRUE, RELIABLE AND ACCURATE figures from the banks on the real lending to the SME sector. The Central Bank’s role must be to police and enforce rather than comment ‘after the fact’, this includes holding the bankers accountable for carrying out the Government instructions on lending, restructure and reform”.
The Association, called on the Government to,
• Increase in SME finance availability by insisting on adherence to bank bail-out conditions.
• Introduce the guarantee scheme, microfinance scheme.
• Develop the alternative bank – a Strategic Investment Bank to introduce competition.
• Investigate other sources of finance that can be made available to viable cash starved SMEs.
• Insist on honest and reliable reporting from the banks, through the Central Bank.
“Investment is crucial in Ireland’s recovery; the refusal of bank credit to small business is resulting in a dramatic reduction in SME investment and doing untold damage to an already fragile economy. The Strategic Investment Bank would help shift the focus of the Economy from construction and property development to industry, as part of the recovery. It would also break the cycle of malpractice and greed in the private banking sector and be a catalyst for sustainable investment and job creation”, concluded Mr. Fielding.