German bank to help with funding of SMEs

The state-owned German development bank KfW is to contribute funding to the planned Ireland Strategic Investment Fund, part of the remit of which will be to improve funding availability to domestic SMEs.

The Frankfurt-based bank is also debating support for Greek SMEs and has already pledged €1bn in aid to support Spain’s small business community.

The Government yesterday said it had agreed a co-operative initiative with its German counterparts aimed at improving funding mechanisms for the economy, including SME financing.

“The KfW will work with the Irish authorities swiftly, in order to deliver on this initiative at the earliest possible date,” it stated.

The investment fund — which is scheduled to formally begin early next year — will absorb the current €6.4bn National Pensions Reserve Fund, with this being added to by KfW funding.

Meanwhile, the Strategic Investment Bank concept — being called for by a variety of commentators — will also be kept under consideration by the Government.

Bank of Ireland and AIB yesterday said they expect 2013 to see marginal annual improvements in the levels of both loan approvals to SMEs and actual draw-downs of money by firms.

Representatives of each bank were present at the launch of a DKM Economic Consultants/Irish Banking Federation SME market monitor. They said a lightening of demand in the third quarter should be followed by a pick-up in the current one.

The report said that any meaningful improvement in SME prospects will be reliant on a recovery in the domestic economy, via improved employment and disposable income levels and a recovery in consumer spending levels.

“The picture which emerges is one of a fragile domestic economy in which personal consumption, government spending, and investment continue to struggle,” according to DKM’s Annette Hughes.

“Similarly, the retail sales index has been relatively stagnant for some time now, both including and excluding motor sales. Any meaningful pick-up in retail sales, and thus SME activity, will require a sustained increase in disposable incomes and a willingness amongst consumers to spend.”


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