NEW RESEARCH PUBLISHED by the Central Bank today says that Ireland has one of the highest rejection rates for loans and credit to small businesses in the euro area.
Ireland is second only to Greece when it comes to the level of rejections for loans and overdrafts to small and medium-sized businesses.
Changes in the terms and conditions of bank credit in Ireland are among the least favourable in the euro area, the research says.
“The data report that the Irish rejection rate for credit applications is the second highest in the euro area, while Irish SMEs are among the most likely to have faced increased collateral requirements, increased interest rates, or lower loan quantities,” the report says.
The research, entitled Irish SME credit supply and demand: comparisons across surveys and countries, was carried out by two Central Bank economists, Sarah Holton and Fergal McCann.
It also found that credit demand in Ireland is above the euro area average but that actual application rates for credit are below the euro area average among small and medium-sized businesses.
It also says that Ireland has the second highest share of discouraged borrowers, i.e. firms who do not apply for a loan despite requiring credit, in the euro area.
The Central Bank says that its report varies “only negligably” from some of the main research in the area between September of last year and March of this year.
This research comes from the European Central Bank and European Commission’s Survey of Access to Finance of Small and Medium Enterprises (SAFE) and the Mazars SME Lending Demand Survey (Mazars).
However, the economists note in their report that their research is based on survey data and they state that they cannot analyse the volume of credit demanded or available to firms in Ireland as balance sheet data on small and medium enterprises is not available.
Earlier, the Irish Banking Federation chief executive Pat Farrell rejected the findings of the report despite having not seen it.
He questioned the methodology and said that its findings appear to differ from that of the Mazars survey.