Call to revamp ‘SME’ bank

The State’s so-called SME bank, the Strategic Banking Corporation of Ireland, should be restructured to more closely resemble a main street lender than merely a funding mechanism for the pillar banks, according to a prominent economic think-tank.

Among a number of measures aimed at breathing life into R&D and enterprise development among domestic firms, the Nevin Economic Research Institute yesterday called for the channelling of early-stage venture capital to SMEs via a State Investment Bank, with a lending value target of 7% of GDP by 2020.

Institute chief Tom Healy said a new investment bank should be a competitor of the main pillar banks, not a vehicle to complement them.

He said the institute’s preference would be for the existing Strategic Banking Corporation of Ireland to be restructured and for it to have more of a branch network presence, where it could more directly deal with SMEs face-to-face.

He said certain sections of AIB could even be hived off to merge with the new-look investment bank. Mr Healy said SMEs need to see a physical and local presence from their lenders. The Strategic Banking Corporation of Ireland has €800m in funds available for SME lending, with Ministerfor Finance Michael Noonan having said that figure will grow.

“As roll-out continues, we and the Strategic Banking Corporation of Ireland will constantly review the need for other funding and any other offers for funding that might come our way,” said a spokesperson for the Department of Finance.

They said the department and the corporation are also helping the Department of Jobs and Enterprise in improving the credit guarantee scheme.

The institute also wants to see a near doubling in the percentage of GDP attributed to the total level of direct R&D spending by Government, business and other entities, to 3% by 2018.

The most recent available figures covering 2013 show the level to be around 1.6% of GDP. The EU average stands at 2%, while Finland spends 3.3% of GDP on direct R&D.

Such an increased direct spend should, according to the institute, boost domestic firms in areas such as education services, cloud-computing, construction and agri-food.

According to the CSO, 63% of all innovation-related expenditure, in 2012, was accounted for by foreign-owned companies.