DUBLIN, June 26  -- One in four loans to small and medium enterprises (SMEs) in Ireland is in default last year, according to a study by the country's Central Bank to be published on Thursday.

The study finds that these businesses owed a total of 21 billions euros at the end of last year, down from between 26 billion euros and 28 billion euros in the beginning of 2011.

The average SME owed its bank 71,101 euros and was paying interest at 6.41 percent. The default rate is 26 percent when measured by the number of loans, and 41 percent when weighted by loan balance, it said.

The study also finds that the default rate is highest for SMEs in the construction, hotels and restaurants, and is shown to increase among the largest 25 percent of loans.

The report said the outstanding balance of lending to SMEs has been steadily falling since 2011, with this pattern observable among all the major sectors of the non-financial, non-real-estate economy.

It said SME credit demand is shown to have fallen slightly in the year to March 2014, but to be around the euro area average.

Credit demand is shown to be non-expansionary in nature, with demand for working capital and restructuring purposes outstripping that for investment or growth purposes, according to the report.

Credit supply conditions are shown to have eased in the period 2011-2014, with rejection rates on SME credit applications falling from 30 to 20 percent between March 2011 and March 2014, and a steady increase in the percentage of firms reporting that the size of loan available has increased, the report said.

In a European context, Irish SME credit conditions remain closer to those of Greece, Italy, Spain and Portugal than to those countries with the most favourable conditions, it said.

It added that the share of discouraged borrowers (those not applying for credit due to the expectation that they will be refused) is significantly higher in Ireland and Greece than elsewhere in the euro area.