Two main banks say demand is the
principal factor
Recent credit approvals and
releases for small and medium-sized companies are expected to be slightly up in
2013 in comparison to 2012, as reported by senior officials of AIB and Bank of
Ireland.
However, both Gerry Prizeman,
small business and agriculture top official at the Bank of Ireland, and John
Irwin, who leads strategy and enablement of AIB’s business banking section,
said the principal factor for lending to SMEs is demand for loans instead of
the accessibility of funds.
The two reported at the release
of a new newsletter of SME market events, the DKM/IBF SME Market Monitor, which
reviews 15 published indicators for the sector to come out with an evaluation
of prospective trends.
Introducing the report, Annette
Hughes, DKM economic consultants Director, said local demand was crucial for
the SME niche although it remained quite weak.
Proof of a rise in local demand —
which includes consumer, investment and government disbursements — would propel
the need for credit but “that remains to be seen”.
Although a few fresh inclinations
have been heartening, including unemployment reduction and enhanced consumer
and purchasing managers’ outlook, stable positive increase in local demand is
not likely to occur soon.
Mr. Prizeman stated that whereas
the decrease in the number of banks doing business in the Irish market would
not aid the credit flow, the departing banks may have already been “emotionally
absent” from the market and SMEs who were transferring their business to Bank
of Ireland or AIB might face a more optimistic outlook when they start to
transact with banks that are dedicated to the Irish market.
He stated that his bank approved
loans of €3.6 billion in 2012 but that only €1.8 billion was availed of.
Mr. Irwin said that, in general,
the quantity of capital out on credit to SMEs remains on the downtrend, which
is not good for banks. Demand was the primary factor to be considered, he said.
Likewise, he mentioned that it
was at times due to the fact that a creditable core business was maintaining
real estate liabilities. Such conditions could be quite intricate; but they
needed to be addressed for the general advantage of the economy. Several SMEs
that claim they fail to get loan approvals in spite of running profitable
companies fall under those conditions.
