ESRI publishes new research on SME Financing

The Economic and Social Research Institute (ESRI) published a new paper alongside the Department of Enterprise, Tourism and Employment (DETE) titled: “SME Financing in Ireland Revisited: Exploring the Long Shadow of the Financial Crisis”. This paper highlights that while the Irish economy has since recovered from the effects of the financial crisis, small and medium sized firms continue to feel its negative effects in the credit finance market.

The paper utilises European Central Bank SAFE (Survey on the Access to Finance of Enterprises) data to underscore how the post-crisis banking sector contraction led to higher interest rates, thus suppressing demand for bank credit and increasing SME resilience on trade credits. This research implies that to combat the ongoing structural challenges to the credit market led by the financial crisis, policies must priorities increasing competition and lowering the cost of financing.

This research leads into a similar paper published by ESRI and DETE; “Irish Small Firm Financing, Where Are We 20 Years Since the Financial Crisis?”. This paper investigates the heterogenous trends in credit access for micro, small and medium sized firms since the financial crisis utilising ECB SAFE data. This paper emphasises the challenges that micro, small and young firms in particular face in the Irish credit market relative to medium-sized Irish and euro area firms. The findings from this paper suggest that encouraging alternative financing options through microfinance institutes, digital disruptors or non-bank lenders may decrease the relatively high barriers to credit that Irish SME’s face compared to their euro area counterparts.

Both papers highlight that neglecting prioritising access to finance through competition and credit rate reductions would suppress growth, investment, and research and development for SMEs in Ireland.

 The papers are available at the links below:

SME Financing in Ireland Revisited: Exploring the Long Shadow of the Financial Crisis

Irish Small Firm Financing, Where Are We 20 Years Since the Financial Crisis?