Bank Lending should be outsourced from IMF while existing bank staff are trained.
13th May 2014
ISME, the Irish Small and Medium Enterprises Association, called on the Government to put more resources into promoting alternative sources of finance for SMEs as the bailed-out banks continue to deleverage and curtail credit to the small business sector. The Association totally rejected the false claims by the bailed-out banks that nine out of ten applications for credit are successful and demanded better oversight from the Central Bank and an improvement in the tax incentives for investment in SMEs.
Speaking at the Oireachtas Joint Committee on Jobs today (13th May), ISME CEO, Mark Fielding said; “Compared with larger companies who have options, SMEs have always faced much greater difficulties in getting credit on a non-punitive basis. It is also very clear that banks are primarily interested in lending to ‘safe’ SMEs, whereas the real difficulties are faced by SMEs that have the kind of risk-profile that banks do not easily entertain these days. There is irrefutable evidence that refusals/declines are higher in Ireland than in other Eurozone countries.” “The truth of course is that it’s not so much the ability of the SME that has deteriorated but the calibre of ‘yellow pack’ relationship managers in banks who between them can’t read a set of figures, are frightened by the word risk and scared to make a lending decision, for fear of career reprisal. In addition, their ability to act as an advocate for an SME when decisions are pushed ‘upstairs’ is abysmal, due to a combination of ignorance, fear and career protection.”
“While the staff learn about risk assessment it might be opportune to bring in relevant expertise from the IMF to ensure that vulnerable but viable SMEs have access to finance,” Fielding continued.
The Government must change the EII and Seed Capital schemes, which are not working but which could, with some adjustment, be a source of alternative finance for progressive SMEs. The fact that only 65 companies availed of the Seed Capital scheme is testament that the initiative is not working.
The Association recommended:
A review of Government capital incentives to make them more suitable.
The secondment of a team of competent bankers from the IMF to oversee SME lending in the rescued banks.
Compulsory training in risk assessment for all lending staff.