Minister Donohoe publishes independent external evaluation on Local Public Banking

19th December, 2019

Report finds that there is no economic case for the establishment of a State owned public banking network

The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, has today (Thursday) published an independent report by Indecon International Economic Consultants on Community Banking in Ireland.

Community Banking Evaluation – Indecon Report

The report concludes that there is no business case for the State to establish a public banking system in Ireland, supporting the outcome of a previous report on this issue published by the Department of Finance and the Department of Rural and Community Development in 2018.

While Indecon’s report concluded there are some areas of market failure, it noted that there is extensive provision of banking services, as well as a wide range of Exchequer funded existing supports, and that there is no case for the establishment of a new State owned banking network. Credit unions are considered to be a ‘community bank’ with an increasing offering of financial products for their members.  An Post is also increasing its financial offerings and there is a significant network of post offices in areas where there is no bank branch within five kilometers.

Minister Donohoe said: ‘The Programme for Government contains a commitment to undertake an investigation of the possibility of bringing in a Community Banking system into Ireland. This commitment was met by Minister Ring and I last year when we published a paper on Local Public Banking. This paper contained a commitment to commission an independent external evaluation to look again at the area of, and potential for, Community Banking here in Ireland. One of the main findings of the report is that there is no economic case for the establishment of a State owned public banking network here in Ireland. I will be carefully considering the recommendations contained within the report, in conjunction with my Government colleagues. The Government remains fully committed to supporting the SME sector, and this report recognises the supports the State has in place to assist them.”


  • The Indecon report supports the conclusions of the Local Public Banking report, in that it notes that there is no economic case for the establishment of a State owned public banking network.
  • The report found that a small percentage of SMEs are discouraged from applying for loans for reasons such as a perception that banks are not lending. However, the majority of SMEs that did not apply for credit did not do so because they did not need it. 
  • There are a wide range of existing state supports to assist SMEs. These include the Brexit Loan Scheme, the Future Growth Loan Scheme, the Local Enterprise Offices, Microfinance Ireland and Enterprise Ireland.
  • The report notes that there is extensive provision of banking services in Ireland, but it does note the level of concentration of the banking system and the interest costs.
  • Indecon state that Credit Unions are considered to be community banks, and they are offering an increasing range of financial services to their members. An Post is also increasing its financial offerings and there is a significant network of post offices in areas where there is no bank branch.
  • Indecon undertook econometric analysis. The results of this analysis showed that there is no correlation between the SME bank finance application rates and the number of banks in a region.
  • The Government will continue to consider new policy measures and initiatives to better serve the needs of Irish SMEs, including rural and regional businesses, and retail customers generally.
  • It is important also that SMEs are aware of the range of financial and non-financial supports available from the Government and its agencies and in this context, work is being undertaken, and will continue, to increase SMEs’ awareness of these supports, including for those in rural areas.
  • The Report contains a number of recommendations which are detailed below: 

Leveraging Role of State Supports for SME Infrastructure to Address Market Gaps:

  1. Continue to target rural enterprise support in future counter-guarantee loan schemes. 
  2. Expand Microfinance Ireland’s mandate to provide enterprise loans of up to €50,000. 
  3. Promotion by Local Enterprise Offices of Micro Enterprise Loan Fund. 
  4. Set ambitious targets for regional impact of any revised Brexit loan scheme. 
  5. Consider new initiatives to support expansion of SME lending by newer platforms.

Reducing Financial Exclusions and Managing of Existing Information by Credit Unions, An Post and Local Authorities:

  1. Expansion of Personal Micro Credit Scheme by member-owned credit unions. 
  2. Facilitation of new providers to enhance access to credit in communities.
  3. Development of initiatives by local authorities as part of digital strategies to assist individuals to apply online for banking services. 

Enhancing Competition:

  1. Support the Credit Union Market to deliver Expanded Range of Community Banking Services.
  2. An Post to explore and discuss with its parent Government Department, NewEra, and, where appropriate, the Department of Finance, the possibility of investing in partner financial organisations, where such investment is commercially viable and where it would enhance competition in lending market.
  3. Extend Exemption for New Community Banking Entrants from Notification of Charges for 5 Years.

Reducing Information Asymmetries and Building Skills:

  1. Development of Technology Based Lending Tool Kit by Enterprise Ireland and Local Enterprise Offices. 
  2. Advisory supports by Local Enterprise Offices to include assistance with preparation of lending applications.
  3. Skillnet Ireland to offer analysis of lending requirements as a component in their Management Development Programmes.

Enhanced Responsibility for Commercial Banks:

  1. Commercial Banks should consider the establishment of an increased number of Community Banking Hubs or provide alternative methods of banking services delivery in areas where branch closures may have hindered access to banks.