Interest rates on Irish SME loans now the highest in Europe

6th February 2018

New data from the latest Central Bank bulletin has revealed that interest rates charged to Irish small businesses by the nation’s banks are “substantially” higher than interest rates elsewhere on the continent.

The bulletin also suggests that the interest rate ‘gap’ may be growing further still. The regulator, which published its biannual ‘SME Market Report’, stated applications by small business owners and entrepreneurs for business loans and overdrafts were “considerably lower” than elsewhere in the eurozone.

The report also found that the SME loans market had concentrated in recent months, with “fewer banks holding an ever-larger market share”.

The eurozone average for interest rates on small business loans is 3.3%, according to the Central Bank report. However, the typical small business owner in Ireland is currently required to pay 5% interest rates on average, based on lending by four of the country’s leading banks – Ulster Bank, Permanent TSB, Allied Irish Banks and Bank of Ireland.

The Central Bank report also confirmed that the issue is not exclusive to small firms in Ireland, with larger Irish-based companies also asked to pay higher interest rates than other European nations.

However, Ireland has been boosted this week by the news that the European Investment Fund (EIF) has agreed a second deal with Microfinance Ireland (MFI) to provide funding for 2,100 additional micro-entrepreneurs as part of the EU Programme for Employment and Social Innovation (EaSI).

The new EaSI guarantee will allow MFI to offer a further €30m in funding to small firms over the next five years.

Marianne Thyssen, European Commissioner for Employment, Social Affairs, Skills and Labour Mobility, said: “Thanks to this new financial boost of €30 million from the EU, more than 2000 micro-entrepreneurs will get financial support to start up or develop their business.

“Considering that Microfinance Ireland already created 4,000 jobs through loans to small businesses, we can safely say that these loans are an excellent means to boost jobs and growth, whereby the most vulnerable people in the labour market are not left behind.” 

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