The Funding for Lending Scheme (FLS) is to be phased out over the next two years rather than halted at the start of 2016.

The Bank of England said the scheme, started in 2012 with a focus on mortgages but latterly used to help support small business lending, will be steadily restricted from January.

The move to extend FLS came because the bank said credit conditions for small businesses had not improved enough

Support for mortgage lending was withdrawn in early 2014.

"Conditions still remain relatively tight. So it is important that the support provided by the FLS is withdrawn gradually," BoE Governor Mark Carney said in a letter to Chancellor George Osborne.

The BoE said its Monetary Policy Committee judged the decision would not affect the timing of a future interest rate rise, and that its Financial Policy Committee welcomed the move.

Banks taking part in the FLS lent a net £1.1 billion to small and medium-sized businesses in the first six months of 2015, in contrast to a net reduction in lending of nearly £2b last year.

The biggest net lenders to small-and-medium enterprises during the period were Lloyds Banking Group and newer rival Aldermore, the data showed.

But some small businesses still mistrust banks, after they abruptly withdrew funding during the financial crisis.

The BoE has said poor access to credit was one reason why British productivity remained weak for years after the financial crisis, a situation which is only gradually starting to improve.