Weekend Economists Clean Out Davy Jones' Locker, March 2-4, 2012

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49. Bank finds firms not getting credit

http://www.irishtimes.com/newspaper/finance/2012/0303/1224312711577.html

CREDIT CONDITIONS for Irish small and medium enterprises are worse that for their European counterparts, a conference organised by the Central Bank was told yesterday.

The conference also heard that though Irish SMEs may be less productive than foreign companies, they employ considerably more people.

Central Bank governor Patrick Honohan said SMEs were facing a dual challenge in terms of funding. On the one hand, there is “massive credit misallocation”. On the other, the depletion of the personal wealth of many families leaves them unable to fund start-ups and expansions with their own funds and “the lack of bank credit is likely to be a more serious drag on the recovery than it might otherwise be”.

When it comes to credit conditions, research presented yesterday shows Irish SMEs are facing tougher conditions than their European counterparts. Three-quarters of Irish firms say they must pay higher interest rates for new lending, compared with 62 per cent in the euro area, while it is also more difficult to get larger loans in Ireland and collateral requirements are also higher.