Risk Sharing

In 2012, the Credit Guarantee Scheme (CGS) was developed and launched by the Department of Jobs Enterprise and Innovation (DJEI) to aid SMEs particularly hard hit by the financial crisis. Over the course of 2016, the SBCI worked to establish risk sharing capability and products to support additional lending to SMEs in Ireland and to act as a conduit for European SME financing initiatives. To this end, the SBCI took over the operation and management of the Credit Guarantee Scheme in October 2016, with a view to launching a more extensive CGS in 2017. In January SBCI Committed Funds (€m) 2017, the SBCI launched its own SBCI guarantee backed loan product – the Agriculture Cashflow Support Loan Scheme. Risk support for this product was sourced from the European Investment Fund in the form of a counter-guarantee under the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME).

European Investment Fund – COSME Programme

The European Investment Fund (EIF) is part of the European Investment Bank group. Its central mission is to support Europe’s micro, small and medium-sized businesses by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment.

COSME is the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (SMEs) running from 2014 to 2020 with a total budget of €2.3bn. In December 2016, the SBCI signed the COSME Loan Guarantee Facility which supports guarantees and counter-guarantees to financial institutions and national promotional institutions to assist their provision of additional loans and lease finance to SMEs. The COSME counter-guarantee provided to the SBCI to support loans to SMEs is the first use of COSME in Ireland. The SBCI will use this counter guarantee in 2017 to support farmers experiencing short term financial pressure due to price and income volatility through an Agriculture Cashflow Support Loan Scheme.

Signing of COSME agreement, December 2016. L-R European Investment Fund Deputy Chief Executive, Roger Havenith; Minister for Finance, Michael Noonan TD; European Investment Bank President, Werner Hoyer; and SBCI CEO, Nick Ashmore.

Credit Guarantee Scheme

The Credit Guarantee Scheme is a government initiative that was set up in 2012 to encourage additional lending to commercially viable SMEs which, under normal lending criteria, are unable to obtain new or additional facilities from their bank. The Scheme facilitates increased credit risk appetite by providing on-lenders with a government-backed guarantee for 75% of the facility value. The Scheme is intended to address three distinct barriers to lending:

  • inadequacy of collateral;
  • where an SME is seeking to refinance due to its bank exiting the Irish market and there is insufficient collateral available to support this refinancing; and/or
  • growing or expanding businesses which operate in sectors which are perceived as higher risk under current credit risk evaluation practices.

In October 2016, the SBCI was appointed operator and manager of the CGS by the Minister for Jobs Enterprise and Innovation. As operator and manager of the CGS, alongside the Agriculture Cashflow Support Loan Scheme, the SBCI will be the primary conduit for guarantee products within the State. A new version of the Credit Guarantee Scheme (CGS 2017) is expected to be delivered in 2017.