An initial tranche of €800 million is to be made available for lending to small and medium-sized businesses by the new State-backed Strategic Banking Corporation of Ireland (SBCI), which is being launched today.
However, the legislation establishing the scheme, which is jointly backed by German, European and Irish money, will facilitate up to €4 billion in lending to the sector should demand require it.
The initiative, which will be administered by the retail banks, is designed to kick-start lending to SMEs by offering loans on more favourable terms than currently available.
Ireland’s SME sector has suffered under a squeeze on credit and investment since the start of the crisis. SBCI loans will aim to help fill that financing gap with longer-duration loans tailored for company needs.
The rates charged on loans will vary from product to product but they are expected to be about 1 per cent cheaper that current market rates.
The scheme will be financed initially with €150 million from the German Promotional Bank KfW, with the other €650 million coming from the European Investment Bank (EIB) and the Ireland Strategic Investment Fund (ISIF), formerly the National Pension Reserve Fund.
It will be launched at special signing ceremony in Dublin today attended by the German finance minister Wolfgang Schäuble, the head of the EIB Werner Hoyer, Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin.
Dr Schäuble has said his country’s €150 million low-interest loan to Ireland would support the economy after its “successful and consequential” implementation of reforms.
Officials from the KfW said the loan, matched by a second €150 million from the EIB, reflected a shift in Berlin’s thinking on austerity.
Dr Schäuble said he hoped solid Irish firms would benefit. "I am confident the SBCI will help improve the economic situation and labour market in Ireland and contribute to Europe, " said Dr Schäuble to The Irish Times. "This is something from which we will all benefit."
Mr Noonan welcomed the Berlin-backed loan as part of a fresh effort by the Government-backed SBCI to grow Ireland’s small business sector and grow the Irish economy.