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DNB-New statistics show sharp contraction of small loans to SMEs

July 21, 2014

ENP Newswire - 21 July 2014

Release date- 18072014 - Bank lending to small and medium-sized enterprises (SMEs), in particular small loans, contracted towards the end of last year.

Whereas the total sum of outstanding loans to SMEs in the fourth quarter of 2013 was 0.9% lower than in the three preceding quarters, the category of loans up to EUR 250,000 decreased by 1.6%.

This is shown by new statistics on SME lending compiled by De Nederlandsche Bank (DNB). Although loans up to EUR 250,000 account for only 11% of total SME exposure, the relevant businesses constitute 85% of all SMEs with bank loans. As the new statistics provide more insight into the dynamics of SME lending, they may contribute to finding solutions for potential credit constraints.

SME lending has been a topic of much debate lately. Small enterprises report having difficulty in obtaining credit, in part because banks pay closer attention to the risks involved. However, the crisis has eroded the financial position of many SMEs, potentially undermining their creditworthiness. Reduced demand for credit is another major factor causing the lending volume to contract. Until now, a lack of proper data on SME bank lending meant the issue was difficult to analyse.

Insight into SME lending

DNB has introduced new statistics with a view to obtaining a deeper understanding of the development of SME lending in the Netherlands. In future, the three major banks will be submitting mutually consistent quarterly reports on their lending to SMEs, i.e. enterprises whose annual turnover does not exceed EUR 50 million. The SME segment accounts for some 60% of all employment in the business sector. Most loans to SMEs are provided by the major banks, which have meanwhile submitted their reports on the third and fourth quarters of 2013.

Many SMEs are affected by the sharp contraction of small loans

At the end of 2013, bank exposure to SMEs in the Netherlands totalled approximately EUR 143 billion, representing some 40% of total credit supply to the business community. In 2013 Q4, Dutch SME lending volume contracted by 0.9% relative to 2013 Q3 (Figure 1).

Figure 1

In particular, the volume of smaller loans - up to EUR 250,000 -contracted sharply, by 1.6% quarter-on-quarter. Totalling EUR 15 billion, i.e. 11% of total SME lending, these smaller loans are relatively limited in volume (Figure 2, left pie chart). Nonetheless, 85% of SMEs seeking recourse to bank lending have a loan up to EUR 250,000 (Figure 2, right pie chart). By comparison, the volume of outstanding loans of EUR 250,000 up to EUR 1 million totals EUR 35 million but is accounted for by less than 10% of SMEs with bank loans. In addition, only 4% of SMEs have a loan exceeding EUR 1 million.

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Source: ENP Newswire

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