OECD proposes more sustainable, funding alternatives for small firms

A functioning SME loan securitisation model — incorporating the selling of such debt via covered bonds — is required in Ireland, according to the OECD, in order to meet the need for more alternative sources of funding for the country’s small business community.

In its preliminary review of the Government’s Action Plan for Jobs programme, published yesterday, the international economic think-tank said that “more sustainable, market-based funding alternatives should be explored — such as SME loan securitisation (including covered bonds) and mezzanine (hybrid debt/equity) financing instruments.”

It did note, however, that the 2014 edition of the Action Plan for Jobs programme “contains commitments to develop alternative sources of finance for SMEs”.

Noting the State’s support in the maintenance of venture and expansion capital, the OECD said a formal assessment of the costs and benefits of supporting SMEs, through equity, “would be helpful, as equity instruments tend to be of higher cost than standard debt instruments, and are not necessarily suitable for the smaller segment of SMEs.”

Overall, the OECD expressed its satisfaction with Ireland’s progress, saying the country is moving in the right direction, but that it “must travel faster“, with “significant challenges” remaining if the Government is to lower the country’s unemployment rate further.

In Dublin to launch its review, the body’s deputy secretary general — former Belgian prime minister — Yves Leterme added that Ireland is on the right track but must maintain the momentum it is currently showing.

He added that job creation, alone, cannot be the sole barometer of success and that more needs to be done to help youths and “disadvantaged” members of society to find employment.