Ireland’s positive economic forecast from the European Commission could be threatened by a failure of banks to offer credit to small and medium enterprises, and the rate of small businesses being declined for credit is rising.

The recent forecast for economic recovery was generally positive but didn’t come without warning – specifically that the lack of lending to SMEs and the construction industry could stifle growth and poses a real risk to recovery. To get a better grasp of what this means for small and medium enterprises Newstalk Breakfast spoke to Mark Fielding, CEO of Irish Small and Medium Enterprise Association.

Fielding explained that the level of small businesses being refused credit was rising, and the most recent figures obtained by the Irish Small and Medium enterprises Association show that rates of lending remain far above pre-recession rates and are rising, with the most recent figures showing 54% of SMEs that applied for credit were declined, up from 50% in the previous figures. The ‘normal’ rate is between 18-22% refusal.

“Bank lending remains very weak...Our  figures would show that 54% of small businesses that went to their banks in the 3 months up to the end of February were refused, that’s a 54% refusal rate, that’s up from 50%,” fielding said.

“The norm would be somewhere between 18 and 22%, so you can see the massive difference, and we’ve been doing these surveys since 1993,” Fielding added.

The reason for the decline in lending is not due to a lack of credit, according to Fielding, but rather due to a lack of expertise in the banks, who have now become chronically risk averse.

“It’s just that they have lost the expertise to assess risk. The banks in Ireland are almost risk averse now and they’re running away from any type of lending to SMEs...Economic progress is not going to be sustained if small businesses can’t get finance for growth,” Fielding said.

Listen to the full interview below or download on iTunes