Our first priority following our establishment in September 2014 was to put in place secure sources of long-term, lower cost funding to support our financing objective. To this end we obtained initial financing facilities totalling €790 million from the German development bank KfW, the European Investment Bank and, under a Ministerial direction, from the Ireland Strategic Investment Fund. Critically, we have ensured that the financing advantage secured in these funding arrangements is, other than the recovery of costs, passed on to the end SME. This is written into the loan agreements with our on-lender partners and closely monitored.

In 2015 we committed a total of €751 million to five on-lending partners for the benefit of the Irish SME market. Three of our on-lending partners are established banking institutions, AIB, Bank of Ireland and Ulster Bank and the remaining two are non-bank finance providers, Finance Ireland and Merrion Fleet. The introduction of two new non-bank on-lenders offering specialty finance marked the commencement of the SBCI’s drive to increase competition in the market and has made a significant contribution to rebuilding the SME finance sector.

It is a feature of the Irish market that SMEs are more dependent on banks than SMEs in other countries and it is important that they be aware of the increasing number of non-bank funding options that are starting to emerge.

More generally, Irish SMEs have been paying more to borrow than similar businesses across Europe. At the SBCI we are seeking to address this and drive competition by introducing new low-cost, SME-friendly financing options to the market provided by both banks and non-bank institutions. It is important that, in seeking financing, SMEs shop around and do not inadvertently miss out on low-cost, innovative financing that can help them grow their business. Access to finance plays a key role in driving economic recovery and job creation, and we are committed to ensuring that SMEs across the country are armed with the knowledge of how to access lower cost funding.

Another area of focus in 2015 has been the development of our range of products so that they meet the business needs of SMEs. Our initial suite of products includes investment and working capital loans, re-finance of exiting bank loans, agriculture investment loans and leasing and hire purchase facilities. We are working on expanding this product range in 2016.

In the early months of 2016 we have built on the substantial progress made in 2015 with the addition of a sixth on-lender, First Citizen, bringing our total loan commitment to €791 million. We also have a healthy pipeline of potential on-lenders and are working to put in place additional funding in line with the growth of our business.

To be effective, the SBCI needs to build awareness of its brand and products among SMEs. To this end a public awareness campaign utilising a mix of radio, print and on-line media was launched in February 2015. While good progress has been made in increasing awareness of the SBCI in 2015, the campaign will continue in 2016 complementing the national thrust of the 2015 campaign with a more regional focus. A vital part of the campaign is networking at SME events and we attended over 100 events around Ireland in 2015 exhibiting, presenting and listening to thousands of SMEs.

For the period from our establishment on 12 September 2014 to 31 December 2015 the SBCI made an operating loss of €3.73 million. This is due to the lag between our becoming fully operational in the autumn of 2014 and the generation of income as our on-lending partners come on board and draw down funds. Longer-term, our financial goal is to cover our costs and otherwise to convert our financial advantage into reduced borrowing rates for SMEs rather than to accumulate profits. The SBCI has been capitalised by the Minister for Finance to the value of €10 million. If the board decides that in order to meet its financial obligations further equity is required, it may issue further shares to the Minister up to a value not exceeding the authorised share capital of the SBCI of €250 million.

In his statement, the Chairperson refers to the work we have done in developing our strategy for 2016 and 2017 and further detail on this is set out in the body of this report. We are acutely aware that we are operating in an environment where Irish SMEs continue to face challenges sourcing funding and credit, particularly for smaller borrowers. While I believe the SBCI has achieved a lot in a very short time, the provision of lower-cost, accessible credit to SMEs remains a significant issue and one that needs to be addressed if the economic and employment potential of the SME sector is to be achieved.

In conclusion, I would like to acknowledge the commitment of the Board, the SBCI team and the NTMA staff who have delivered the very significant progress we have made since formation. I would also like to express our gratitude for the strong support the SBCI has received throughout the process of its set-up and first year of operation from the Minister for Finance, the Department of Finance and numerous stakeholders both within government and across the SME community.

SMEs are indicating that 2016 will be a year of growth and expansion. We are focused on supporting this growth through building on the momentum generated to date with increased funding and a more diverse range of SBCI on-lenders and products and greater competition within the sector.

Nick Ashmore
Chief Executive