Ongoing governmental calls for Irish banks to increase their lending to the small and medium enterprises (SME) sector appears to have had some affect – firms are beginning to recruit in this area.

According to recruitment sources close to the situation, Bank of Ireland and KBC Bank Ireland are currently making enquiries about the possibility of bolstering their Dublin SME lending teams.

BoI is rumoured to be looking for at least a dozen hires in the Irish capital while KBC is supposedly looking to fill 4-5 vacancies from assistant manager to senior manager level.

Of course, as a recruitment spree this is hardly astronomical. But subdued lending to the SME sector in Ireland has been a bone of contention for some time now, so any new hires suggest that banks are at least heeding government warnings.

Some damning statistics published by ISME last week suggested that banks were refusing credit to 55% of businesses applying for funding. The Irish Banking Federation has since refuted the statistics, saying that the only authoritative figures were published by Mazars in April, showing that eight out of ten applications were being approved.

However, the research also showed that SME lending had dropped again in the final three months of 2009 (admittedly only by 1.2%) and by 3.6% for the comparable period in 2008.

Nonetheless, Labour Party leader Eamon Gilmore has called on Taoiseach Brian Cowen to increase pressure on banks to lend to SMEs, saying they are required to do so under the terms of their recapitalisation agreements.

ISME has even suggested state support be withdrawn from those banks who fail to comply.

It’s also possible that the new hires at KBC and BoI could be a pre-emptive attempt to stave off future competition. Both Anglo Irish and Irish Nationwide may rebrand themselves as SME lenders under terms of their EC restructuring plan.

AIB, meanwhile, has made a commitment to the government to provide an additional €3bn in new or additional SME lending for both this year and next.