Latest Review shows at least three-quarters on average of all SME credit applications approved
Confirms a continuing reduction in the demand for credit by SMEs – 23% fall in the number of applications to banks in the seven-month period to Sept’09
Credit demand impacted by difficult trading conditions and reduced turnover for SMEs
Banking sector remains supportive of viable businesses through the €32.7 billion total credit outstanding and various non-finance initiatives
The Irish Banking Federation (IBF) pointed today to the second Mazars Review of Lending to SMEs – details of which have appeared in media reports – as highlighting the banking sector’s commitment to supporting viable SMEs through the ongoing challenging economic environment. Notwithstanding the severe contraction in economic activity, the Review shows that during the period covered (March-Sept 2009), total outstanding credit to the SME sector stood at €32.7 billion – representing a marginal decline of 2.6% from €33.6 billion recorded for the period covered (June’08-Feb’09) in the first Mazars Review.
The extent of that contraction is clearly reflected in this latest Review which shows that some four out of five SMEs surveyed (78%) report a continued decline in turnover – with nearly half of them (45%) reporting a decline of 20% or more. Notably going in the opposite direction is the extent to which SME customers are not meeting their repayment obligations – rising (in value terms) from 15% of banks’ lending in June’08 to 22% in February’09 and to 32% by Sept’09.
Not surprisingly, this gives rise to a continuing reduction in the demand for credit. Less than half (46%) of SMEs surveyed requested credit during the seven-month period to end-Sept’09 – down six percentage points on the previous period. And it is notable that at least three-quarters on average of these credit applications were approved – amounting to some 70,000 approved credit applications and a drawdown of more than €2.6 billion in loans and finance & leasing in that period.
Welcoming the Review’s findings as evidence of the banking sector’s support for viable businesses, the IBF’s Chief Executive, Pat Farrell, also pointed to important initiatives:
“The IBF and many of our member banks have been working through the Government’s Credit Supply Clearing Group with the relevant departments/agencies and the SME representative groups on policy recommendations contained in the first Mazars Review. Already we have seen significant developments in the form of the new, independent credit review process to be chaired by John Trethowan and by way of various non-finance information/advisory/mentoring supports. We remain fully committed to this process.”
The Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.
Further Information: Felix O’Regan, Head of PR and Public Affairs, IBF, tel. 6715311, 087 6481644