SMALL AND MEDIUM-SIZED enterprises are likely to benefit from lower interest rates on loans provided from a German investment bank following an agreement between the government here and in Berlin.
In the wake of Ireland’s decision to exit the bailout programme without a precautionary credit line, the German government offered the services of its state-owned investment and development bank, KfW, whose officials were in Dublin this week.
Under the terms of a deal reached with the government here, KfW will be able to assist SMEs with loans at interest rates lower than they would be able to access from Irish banks.
The Taoiseach Enda Kenny explained how an SME looking for a loan of half-a-million euro at Irish rates would be expected to pay about 4.25 per cent interest whereas the rates offered by KfW would come in at about 2 per cent.
“We expect to be able to put together a structure and a facility with KFW for assisting small and medium enterprises in terms of access to credit here,” Kenny said.
Representative groups such as ISME, Irish Small and Medium Enterprises, have been critical of the slow pace of Irish banks’ decision-making in relation to loans.
In September, ISME’s Mark Fielding pointed to a decline in lending to SMEs as indicating that banks are not lending to the level appropriate to an economy “on the mend”.
“The statistics from our own Central Bank, the ECB and numerous economists, demonstrate the dearth of appropriate credit. We must put an end to the fiction that bailed out Irish banks are functioning properly,” he said at the time.
KfW was formed in 1948 as part of the Marshall Plan to rebuild Europe in the aftermath of World War II and primarily financed reconstruction projects. Its name originally comes from Kreditanstalt für Wiederaufbau, which means meaning Reconstruction Credit Institute.
The bank is majority owned by the Federal Republic of Germany with a fifth owned by the country’s individual states. The head of its supervisory board is the current German Finance Minister Wolfgang Schäuble.
KfW was described by the popular German tabloid, Bild, as “Germany’s dumbest bank” in 2008 when it transferred €300 million to Lehman Brothers on the day the American investment bank collapsed as part of routine currency transactions.
To embed this post, copy the code below on your site
have your say