THE NUMBER of small- and medium-sized firms refused funding by banks has risen sharply, according to a new study released by the Irish Small and Medium Enterprises Association (Isme).

The latest Isme Bank Watch survey reveals that 55 per cent of businesses were refused funding in the three months to the end of February, compared to 42 per cent that did not get credit facilities in the three months to the end of October last.

In the three months to May 2008, 20 per cent of SMEs that applied for funding were refused credit.

Isme chief executive Mark Fielding said the survey results showed that despite the banks’ assertions that they are “open for business”, there is clear evidence that Irish financial institutions have effectively “shut up shop”.

“The survey results confirm, contrary to what the bankers are telling us, that SME lending figures are deteriorating and that there is no evidence to suggest that they plan on opening up lines of credit anytime soon; in fact, the opposite may be the case,” said Mr Fielding.

“The reality is that the banks are looking after their own interests and shoring up their own balance sheets to the detriment of the rest of the economy.”

The latest survey shows that 32 per cent of credit requests made during the three months to the end of February were for overdrafts, with 47 per cent for term loans.

Approximately 80 per cent of respondents stated that banks are making it more difficult for SMEs to access finance.

Isme called on the Government to intervene and force the banks to start opening up lending channels to small businesses.