AIB to be asked to explain funding advert

THE Department of Enterprise and Employment is to ask AIB today to explain how it took out an advertisement claiming there was additional funding available for a low-cost finance scheme aimed at small businesses.

The scheme, administered through the main banks, is run in association with the Department of Enterprise and Employment and the European Union. In all, £204 million was made available under the scheme, known as the Access to Finance Scheme.

The Department's demand for an explanation follows a complaint from the Irish Small and Medium Enterprises Association (ISME) which last night condemned AIB, saying the advertisement was grossly misleading.

It pointed out that earlier this year AIB was reported as having allocated its portion of the scheme. Client firms were told not to apply as there were no funds left.

Yesterday's advertisement said additional low cost finance has now become available through the AIB subsidised loan scheme in association with the Department of Enterprise and Employment and the European Union.

AIB agreed to lend £79 million of the £208 million to small firms at 6.5 per cent over seven years. The Government and the EU contributed £21 million to the fund. The banks were asked to allocate the monies by December 31st.

"At the beginning of September 1996, AIB had invested just £35 million of its £79 million allocation," Mr Frank Mulcahy, chief executive of ISME, said last night. "It took AIB one year to invest £35 million and yet it expected to invest the remaining £44 million in just four months," he said.

He accused AIB of playing "hard and fast with the fund, because there was no margin in it for them". He claimed AIB was now desperate to distribute its remaining portion of the fund. "Presumably in fear of punitive action by the Government."

It is understood that by the end of October £136 million had been disbursed by the banks.

An AIB spokesman conceded last night that there may have been some confusion over the advertisement. It was not additional finding, he said.

The spokesman said there had been a number of cancellations fir funding and the bank now had this money to allocate. "It is our intention to have it drawn down by the end of the year," he said.