New loans drawn down through the Strategic Banking Corporation of Ireland (SBCI) slumped by 68 per cent last year to the lowest level since the State-owned organisation opened for business in 2015, as small companies became increasingly cautious about taking on fresh debt.
The decline also reflected what chairwoman Barbara Cotter called the "counter cyclical" nature of the company's funding model. This is understood to refer to how banks are now able to fund themselves and lend on at cheaper commercial rates than when the SBCI was set up and provide money at a discount to market rates.
Some €123 million of loans were drawn down through on-lending partners, including the Republic’s main banks and non-bank lenders such as Fexco and Finance Ireland, during the course of 2018, according to SBCI’s latest annual report, published on Monday. However, the figure was down from €391 million for 2017, as outlined in SBCI’s previous report.
While the SBCI launched a €300 million Brexit loan scheme to help businesses prepare for the UK’s withdrawal from the EU, the low level of drawdowns experienced by the organisation echoes comments from mainstream banks.
Top executives in both AIB and Bank of Ireland have said in recent months that small to medium-sized enterprises (SMEs) are reluctant to take on new borrowings or invest as uncertainty over Brexit continues.
This contrasts with growing demand for mortgage, personal and corporate lending across the banks, they have said.
The average loan size recorded by SBCI last year was €40,487, with the agricultural sector accounting for 29.4 per cent of new lending, construction services, 13.7 per cent, and whole sale and retail, 10.9 per cent.
Figures issued in recent days by the Department of Business, Enterprise and Innovation show that only €29 million of €300 million on offer through the Brexit loan plan has been authorised at bank level on 132 loans, almost 14 months after the support was launched.
The subdued take-up of such loans is also said to reflect an unwillingness by SMEs to commit to fresh borrowings when they do not know what to prepare for in light of political uncertainty in the UK, Ireland’s closest trading partner.
Some 70 per cent of loans issued through the SBCI last year were used by SMEs to invest in growing their business, with 30 per cent used for working capital purposes.
As of the end of March, the SBCI has supported 26,762 SMEs with a total amount lent on since inception exceeding €1 billion, according to the organisation.