Irish Economy 2013: ESRI holds SME financing conference

Bank of Ireland was founded in 1783 and the premises at College Green, Dublin, of the Irish Parliament, which became defunct on the Act of Union coming in to effect in 1801, were purchased for £40,000 in 1803.Irish Economy 2013: The ESRI (Economic and Social Research Institute) will today hold a conference today on SME financing.Last week, Fiona Muldoon, the director of credit institution supervision at the Central Bank,told a conference that half of all lending to SME (small and medium enterprises) business is in arrears. She said that of the €50bn lent to the sector by the domestic banks, some €25bn was impaired. 70% of people in Irish private sector employment are employed by SMEs there is a…direct knock-on for these employees (& past employees) into the whole area of household debt and mortgage arrears in particular.The following are summaries of the presentations to be given at the conference. Presentation slides will be available to download from theESRI website sometime Friday.SME Credit Constraints and Macroeconomic Effects – – Petra Gerlach-Kristen, Brian O’Connell and Conor O’Toole, ESRIThe research shows that finding customers for their products or services is the largest problem for small and medium enterprises (SMEs) in Ireland today. Credit constraints rank third as a problem and affect only a small minority of SMEs (between 4 and 11 percent, depending on the classification). Most SMEs do currently not apply for funding because they do not need it. Those facing credit constraints are mainly young, small firms and firms that have a domestic customer base and a debt overhang. Their main response to the constraints is to reduce investment and jobs. Clearly this has immediate and longer-term consequences for employment and economic growth. Consequently it is appropriate that policy explores ways of reducing these credit constraints. Measures tackling specific problems, such as the Microenterprise Loan Fund, seem particularly promising. The extent to which the financial system can provide adequate funding for firms once aggregate demand recovers remains an open question. Further research on the financing of SMEs is needed to establish this.Factors Affecting Euro Area SME’s Financing Conditions:Identifying the Cause of Heterogeneity Across Countries – – Sarah Holton, Martina Lawless and Fergal McCann, Central Bank of IrelandThis paper uses survey and market data to identify SME credit supply constraints and heterogeneity across euro area countries during the recent crisis. Overall we find that fragmentation in sovereign bond yields, or “risk free rates”, has affected credit supply. Even after taking account of borrower quality, changes in sovereign yields and banks’ refinancing costs, there is evidence of a credit crunch in certain countries. We find that domestic demand and the level of private sector debt have had a significant impact on the supply of credit to SMEs.Review of the Equity Investment Landscape in Ireland — Adrian Devitt, ForfásWhile continued efforts are required to address banking issues, promoting equity investment represents an opportunity to support growth oriented viable businesses and to provide alternatives to bank funding, particularly for indebted firms. We need to place a stronger focus now on encouraging private sector investment in productive firms. The argument for a greater range of financing options is strong. More varied financing options gives businesses greater choice, promotes competition amongst finance providers, potentially reduces cost, and leads to greater resilience in the financial system.While external equity investment is only a viable option for a minority of firms, our research highlights that its use is growing. The provision and use of equity is largely guided by the market but there are actions the State can take. A wide range of initiatives are underway but there is potential for further additional actions to address the issues which concern both businesses and investors. While many entrepreneurs voice concerns over the lack of equity funding, investors cite the absence of viable projects as a key barrier to investment. The report sets out a range of recommendations for entrepreneurs and firms seeking funding and for investors.

@DrMCashin: @DrMCashin Irish Economy 2013: ESRI holds SME financing conference: Irish Economy 2013: The ESRI (Economic and… http://t.co/6UvUbJTCko
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