Data released by the Central Statistics Office (CSO) in its report of July 2016², showed that SMEs in Ireland accounted for 99.8% of businesses, 68.9% of employment and 56.1% of turnover.

Gross new lending to SMEs (excluding financial and real-estate) has continued to grow with 2016 showing the highest level of gross funds drawn since 2010. Lending in 2016 totaled €3.2 billion (22% higher than 2015). However, despite this growth, the overall stock of outstanding SME credit is still declining, reducing from €34 billion in mid-2010 to €16.1 billion in Q4 2016.³ This indicates that the volume of repayments continues to outstrip new lending in each quarter. Although SME perception of banks’ willingness to provide credit has improved, the volume of SME applications for credit continued to decline. 23% of SMEs applied for bank finance between April and September 2016 compared to 30% in the same period in 2015.⁴ While the return of growth in new lending is encouraging, the SME sector is still highly dependent on a small number of large banks with growth among new entrants and non-bank financing starting from a very low level.

There are currently seventeen credit institutions, residing in Ireland, that contribute data to the CBI’s SME lending statistics. The principal bank providers of debt finance to SMEs in the Irish market are Allied Irish Banks, Bank of Ireland and Ulster Bank which together account for circa 93% of new lending in the market.⁵ There is a clear requirement to increase the number of market participants providing credit to SMEs to enhance competition. The local branch network continues to be important to SMEs. However, the high cost of providing a distribution network is a significant barrier to entry as evident by the lack of a full-service retail bank entering the market in recent years.

During the period April to September 2016, the average Irish interest rate for SME loans less than €250,000 was 5.5%, which is 3.2pps higher than for loans above €1 million and 2pps higher than that for loans between €250,000 and €1 million. As a positive, the average Irish SME interest rate for loans less than €250,000 is lower than in the previous six month period (5.9% in October 2015 to March 2016). Irish SME interest rates continue to remain higher in 2016 than Euro area averages. The average interest rate in Ireland, for loans less than €250,000 (during the six month period April to September 2016), was 2.6pps higher than the Euro area average⁶. The average cost of SBCI loans from inception to December 2016 is 4.6%.

• CSO Report released 6 July 2016, based on the "Business Demography” of Ireland for the period 2008 to 2014
• CBoI Statistics, Table A.14.1 Credit Advanced to Irish Resident SMEs
• SME Credit Demand Survey
• CBI SME Market Report 2016 H2
• CBI SME Market Report 2016 H2