Banks continue to withhold SME credit as 52% refused
ISME CEO Mark Fielding says Ireland's banks "are deleveraging through curtailing SME lending, thereby sabotaging the economic recovery through pure self-interest."
Print12 March 2013
The latest ISME Quarterly Bank Watch Survey, issued today, shows a continuing lack of bank credit for SME customers, as 52% of applications are being refused. The demand for bank credit has shown a small reduction, down four points to 35%. The association demanded that the government, through the Central Bank investigate the inordinate delays in getting a lending decision, averaging five full weeks instead of 15 days as set out in the code of conduct.
The survey which 1134 owner managers of SMEs took part in, showed that 35% of respondents had requested additional or new bank facilities in the last three months; a decrease from the 39% in the previous quarter. What’s more, only 15% of initial bank decisions were made within one week; a deterioration from the 25% in the previous quarter. It took another five weeks, on average, to get a decision, again a deterioration from the four weeks previously reported.
Worryingly, 12% of respondents who required bank finance did not apply for various reasons. Of those 31% were actually discouraged by bank from making an application, 25% were afraid of a reduction in existing facilities and 19% were afraid of refusal.
Of the 48% approved for funding, 71% have drawn down the finance either fully or in part.
Illustrating that bank charges remain an area of concern for small and medium enterprises,40% of respondents had increases in bank charges imposed.
Reductions in overdrafts were also demanded of 36% of SMEs, up from 23% in the previous quarter.
In a strong indictment on the government’s percieved failures, 95% of respondents said the government was having either a negative or no impact on SME lending, up from 94%, reported in the previous quarter. While 63% of respondents are aware of the Credit Guarantee Scheme, only 33% know about the Micro Finance scheme.
Commenting on the survey results, Mark Fielding, ISME, CEO said; "The results of this survey demonstrate, quite categorically, that the banking system for SMEs is not working, despite the vulgar and misleading advertising by the bailed-out banks. While it may suit the administration to believe the bankers’ fiction, the truth of the matter is that banks are deleveraging through curtailing SME lending, thereby sabotaging the economic recovery through pure self-interest.
"The experiment of "leaving the banks to their own devices" and expecting voluntary codes to solve the problems must now cease. Government must take a much more hands on approach or bankers will continue to distort statistics, delay reform and feel free to terrorise small and medium businesses, in their never ending drive to maximise their own profits.
"The economic revival needs a properly functioning banking system. While it is true that the payments system is working and ATM machines are open, the level of engagement of the rescued banks in assisting the SME sector is negligible. Credit lines are being restricted, deadlines missed, decisions delayed while the banks themselves continue their Jeckyl and Hyde act of ‘open for business’ while refusing more than half of all genuine SME credit applications."
The association has called on the government to install better management in bailed-out banks to oversee lending policy and its activity.
"Refusal of credit to viable but vulnerable SMEs is resulting in not only a reduction in investment, in many cases a contraction in business and for some a complete closure. This government must stop expecting the rescued banks to ‘do the right thing’ and set about asserting its authority and acting decisively, otherwise economic recovery is but a pipe-dream," said Fielding.
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