90% of new Irish SME lending was financed by top three lenders

The Central Bank of Ireland has published its first SME Market quarterly market report for 2019. The SME Market Report monitors developments in the provision of credit to Irish Small and Medium Enterprises (SMEs) by financial intermediaries.

The SME Market Report for 2019 found that:

• Gross new lending to SMEs declined 1.7 per cent in the year to 2018 Q4, driven by ‘Manufacturing’, ‘Wholesale, Retail, Trade and Repairs’ and ‘Primary Industries’, with increases elsewhere.
• Market share among the top three banks is high at 90.3 per cent of new SME lending and concentration in the flow of new lending has stabilised since Q2 2016.
• Credit demand remains low compared to previous years with 20 per cent of SMEs applying for credit in the period April – September 2018. A large majority of micro, small and medium firms finance investment from internal funds.
• Working capital remains the most common reason for credit applications among micro and small firms, whereas credit for growth & expansion is more common among medium firms.
• Irish SMEs are more reliant on leasing and hire purchase for investment activities than the EU average but are less reliant on bank loans.
• Rejection rates on bank finance applications have tended to stabilise recently.
• Interest rates on small NFC loans in Ireland are on average 5.7 per cent. Similar size loans are on average 2.5 per cent in other parts of Europe.
• SME default rates have declined from 19.8 per cent in December 2017 to 17.5 per cent in June 2018.
• SME transitions into default over the period of December 2017 to June 2018 were 2 per cent.