Ireland one of stronger EU states for SME credit flow

Credit flow to SMEs is currently less of a concern in Ireland than in other EU member states that have experienced sovereign and banking sector difficulty in the past few years.

The latest SME Market Report, issued yesterday by the Central Bank, shows gross new lending levels to Irish small and medium-sized businesses grew by 10.5% —from €1.9bn to €2.1bn — in the second half of 2014, when compared to the same period last year. Unsurprisingly, the bulk of the new lending, in the latest period, went to the agriculture sector, with wholesale/retail and business and administrative services coming next.

The Central Bank’s findings also touch on a number of other surveys, including the recent Red C/Department of Finance study into credit demand. In this regard, the Survey of Access to Finance of Small and Medium Enterprises (SAFE), undertaken by the ECB and the European Commission is also noted.

According to it, Ireland shows a “steady improvement” regarding levels of concern amongst small businesses over access to credit. There has been a notable decline in the numbers of Irish SMEs reporting a high level of concern over access to finance and an increase in levels of low concern.

The report suggests Ireland is now more in line with so-called EU-1 nations (those with little or no sovereign/banking issues of late) like Holland, Finland, Germany, France, Belgium and Austria than the EU-2 former problem states like Spain, Portugal, Greece and Italy.

When asked about banks’ willingness to lend, the number of Irish firms reporting a deterioration in the latest ECB report has dropped to 17% from 48% two years ago, while the percentage who have seen an improvement has gone from 10% to 33%.

“While this trend is also observed in EU-2 states, the improvement is more apparent in Ireland. Furthermore, in the last two surveys, Ireland is the only country where the share of ‘improvements’ is higher than the share of ‘deteriorations’,” the Central Bank said.

At the end of 2013, Ireland had the third highest default rate of SME exposures for countries partaking in the most recent European stress tests.