New research from the Central Bank says small and medium sized Irish companies face significantly tougher lending conditions than similar firms elsewhere in the eurozone.
It also says demand for credit is no different in Ireland than elsewhere in Europe.
However, the Irish SME sector also faces challenges in paying back its borrowings, with 30% of loans to the sector in trouble.
Of the 199,000 businesses in Ireland, just 500 are large companies. The rest are SMEs employing 1.2 million people and so the flow of credit to such firms is vital for the real economy.
The latest research by Central Bank economists shows that while demand for credit among Irish firms is at or in some areas above the average for the eurozone, the lending conditions imposed by the banks are significantly tougher, in terms of collateral requirements, interest rate charges, size of loans available and rejection rates.
However, the research also shows that a large number of existing loans to the SME sector are in trouble, with 30% of outstanding loans either past, due or in default.
Central Bank Governor Patrick Honahan said the authorities have provided unlimited liquidity to the banks at very low interest rates and noted the importance of the SME sector for the economy as the main engine of job creation.
Elsewhere, the Irish Banking Federation has insisted that banks are lending to SMEs contrary to the new research.
CEO Pat Farrell has said that there was however a depressed demand and this was due to the downturn in the economy.
Mr Farrell conceded that Irish banks charged more for loans than some of their EU counterparts, but he said this was due to the higher risk in lending here.
