O’Keeffe plans SME loan scheme

INITIAL proposals of a loan guarantee scheme for SMEs are due to be presented to cabinet by Enterprise Minister Batt O’Keeffe before the end of the month.

Such a scheme has been called for continuously by the various small business lobby groups over the past year and the Irish Banking Federation (IBF) added its support yesterday, while addressing a Joint Oireachtas Committee on Enterprise, Trade and Employment.

Despite committee chairman, Labour TD Willie Penrose, claiming that the establishment of such a scheme was being blocked by the Department of Finance, IBF chief executive Pat Farrell said it was his understanding that a final decision was due “sooner, rather than later” and that the cash would be there to match it, if established.

A spokesperson for the Department of Enterprise, Trade and Innovation added that the minister is “finalising details of a possible state-backed loan guarantee scheme” to be presented to cabinet “over the next few weeks”.

They added that any plan would be targeted and tailored to the specific needs of high-growth potential small and medium-sized enterprises (SMEs).

Mr Farrell told the committee that such public policy intervention as a loan guarantee scheme “could change the risk profile of lending decisions and bring some loan applications over the line”.

The scheme would bolster the proposed €14 billion being set aside by the main banks for available credit to SMEs over the next two years.

Mr Farrell went on to claim that the banks are continuing to lend to and support sustainable businesses, adding that the establishment of the Credit Review Office – which is due to publish its first report into lending application trends next week – has been another positive development in the SME credit debate.

However, he did concede that all was not positive in lending terms, but said that the environment has changed dramatically, more so than policy and that the banks have “an absolute obligation” to react accordingly and “advancing additional credit to distressed SMEs is not going to solve the problem”.

Also addressing yesterday’s committee were representatives of professional services firm, Mazars – which, over the past 12 months, has issued three reports into bank lending levels to the small business community.

It reiterated calls for a number of measures to be adopted, including greater information exchange between banks and SMEs and the periodic reporting of key lending information, in the public domain, under “a formal structure such as the Central Bank”.


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