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IN THE PAST three months, 54 per cent of credit applications by small- and medium-sized firms have been refused by bailed-out banks, the ISME quarterly bank survey shows.
The increased refusal rate comes after slight improvements in the previous two quarters and has prompted an angry response from the sector which believes the Government is not doing enough to safeguard viable businesses.
According to the data, demand for credit from Irish businesses has remained steady at about 37 per cent but refusal levels have increased. ISME, the representative body for such firms, has now called on the Government to intervene at board and management levels at the rescued banks to “ensure they are servicing the economy” by lending appropriately.
“It may suit the administration to believe the fiction created by bankers’ spin that the system is functioning, and it suits the bankers to maintain this fiction, otherwise why sink billions of taxpayers’ money into keeping them afloat,” said ISME chief executive Mark Fielding after the publication of the report this morning.
When it comes to assisting the SME sector to grow, the bailed-out banks are continuing to make it difficult for SMEs to access finance, thereby hindering the economy.
“The bailed-out banks are not fixed, rescued bankers continue to utter untruths, banking reform is delayed and banking policy is turning good business bad,” he continued. “The Government, the owners, must take a more hands on approach, while the system is broken, insist on opening credit lines, servicing SME customers and play their part in economic recovery. Otherwise business will stagnate, employment will reduce and the economy will suffer for a generation.”
The survey, which was conducted last week with over 700 respondents, highlighted other problems that companies have when accessing credit. More than 80 per cent who applied for funding said that the banks are “making it more difficult” for them to access finance despite being long-time customers. Meanwhile, 46 per cent experienced an increase in charges, including a rise in their interest rate.
Of the requests made, 48 per cent were for overdrafts and 46 per cent for term loans.
An overwhelming majority of 96 per cent believe the Government is having a negative or void impact on SME lending.
The association has asked the Fine Gael-Labour coalition to insist on reliable reporting – through the Central Bank – by bailed-out banks, as well as an the introduction of the government partial guarantee and microfinance schemes.
It also wants the Government to investigate other possible sources of finance that can be made available to “viable, cash-starved SMEs”.
“In September 2008, the then Government was misled by the bankers about the true state of their institutions,” added Fielding angrily. “Despite being found out as, at best, mistaken incompetents and at worse self-serving liars, the Government continues to persist with a naïve belief that the banks have the ‘ good of the economy’ at the centre of their policies and insist on a hands-off approach.”
“This attitude will only prolong the cycle of greed and malpractice in the banking sector and delay any economic recovery, dependant on SME sustainable investment, growth and the resultant job creation,” concluded the CEO.
Earlier this month, the national credit reviewer John Trethowan criticised AIB and Bank of Ireland, stating he was disappointed that they were not providing more evidence of lending at a rate that could contribute to economic recovery.
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So what they’re saying is that the government bailed them out and they’re doing nothing with that money except for hoarding it and loaning to their buddies? What a total shocker. I never saw that coming.
Fair play to ISME for keeping this issue highlighted, many businesses are trying to keep going and even develop on cash flow knowing it is a time consuming and costly waste of time even applying for credit, business is being strangled and bled to death by government inaction on credit and high costs.
SMEs are possibly the worst exploiters of workers in Ireland. They flaunt labour laws, hide behind the likes of ISME and the SFA.
When it comes back buy a safe .
What?
No mention of the 90% of applicants told by bank staff not to bother applying for a loan?
Considering the banks were in such deep denial in 2008 it’s no wonder since the same cronies are still running the shop that they are hording cash. And whilst they continue to keep their bonuses, from the money we bailed them out with – the rest of the SME’s can sink – with us along with them. The business page of the Sunday Indo had the finest example of how the ‘enterprise challenged’ heads of BOI behave, letting a Jemie Jenkins business fold through lack of a credit line backed by letters of credit from his export customers – he had export orders worth thousands in the states for crying out loud! Just shows even when they promote enterprise week in may and dragons den they are apathetic to any economic need – other than the economy of their own pockets! – Pillar bank my ole!
Ye! forgot about that one – dead right Harry, I was one of them !
The banks are protecting themselves at the direct cost, not only to small and medium enterprises but to the whole economy. While this government waffles and dithers about bank interventions, SMEs are being terrorised and ultimately shut down by discredited bailed-out bankers, arrogant at top level and ignorant at branch level. With 96% of business owners of the opinion that Government have either a negative or no impact on SME lending, this Administration must act now and install active management into the banks, representing the owners, the taxpayers, to ensure honest reporting, sustainable reform and a return to proper banking.
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Get your friends together and sign a petition. Bring that petition to your local TD’s, tell them that they need to confront the banks…all of the banks in your area, that you expect that your TD will write to the local banking institutions informing them that all of the signatories will take their money out of the bank, close their accounts and refuse to do business with them until they begin to loan to the SME sector again. You get 10 or 15 TD’s involved with that (and many TD’s would be delighted of the photo opportunity and to be seen on the side of the little guy) get some air time and a little public anger going and the threat that deposits might suddenly en masse start walking out the door…watch the little piggies squeal then!!
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