The Government will establish an €800 million lending fund for small and medium-sized businesses by the end of the year after Ministers gave the go-ahead for the body, known as the Strategic Banking Corporation of Ireland (SBCI).
Minister for Finance Michael Noonan said the SBCI – backed by German, European and Irish money – would provide lending arrangements not currently available to SMEs in Ireland.
“The best way to see it is to see it as a fund, to see it as a big fund. We expect it over a five-year period to end up with a balance sheet of about €4 billion,” Mr Noonan said.
The Government aims to enact legislation this summer to set up the fund, with €500 million credit available initially. "I would expect that we would have funds of about €800 million at the end of this calendar year," said Mr Noonan. Institutions The principal institutions backing the SBCI include Kreditanstalt für ~Wiederaufbau (KfW), a German state-owned promotional bank which borrows at favourable rates on the back of guarantees from Berlin. The KfW's involvement follows engagements between Taoiseach Enda Kenny and German chancellor Angela Merkel.
“Let me be clear, the German chancellor would not have offered that if she did not have a sense of trust in Ireland’s recovery,” Mr Kenny said.
The other main backers are the European Investment Bank and the Irish Strategic Investment Fund, which is soon to take charge of the €6.8 billion in the National Pension Reserve Fund (NPRF).
With the lack of bank credit a source of trouble in the SME sector, the move was welcomed by business interests. Big advantage "The big advantage is the different type of lending that they'll do," Mr Noonan said.
“An SME who traditionally has been going into the bank to renew working capital arrangements every 12 months to try and fund expansions on short-term loans of three years: they’ll be able to get 10-year money.
“Part of the KfW model as well is to have repayments holidays. Typically for an expanding SME, they would have no repayments to make in the first year and a half. And then the repayments would click in and stretch over 10 years.”
Tánaiste Eamon Gilmore said the initiative was first proposed by Labour when in opposition. “What we had in mind was a means by which the monies in the NPRF would become available for investment in the Irish economy, and I think in many ways that original proposal became the Strategic Investment Fund.”
