Written answers

Tuesday, 28 June 2011

Department of Agriculture, Marine and Food

Credit Availability

8:00 pm

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Question 443: To ask the Minister for Agriculture; Fisheries and Food if he will provide details of any possible sources of loan finance from European sources including the European Investment Bank in respect of small and medium enterprises here wishing to undertake business expansion projects; and if he will make a statement on the matter. [18200/11]

Photo of Simon CoveneySimon Coveney (Minister, Department of Agriculture, the Marine and Food; Cork South Central, Fine Gael)
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The Department of Enterprise, Jobs and Innovation advise that the following is the situation with regard to European sources of loan finance available to SMEs in Ireland:

The European Union provides support to European small and medium-sized enterprisesindifferent formssuch as grants, loans and, in some cases, guarantees. Support is available either directly or through programmes managed at national or regional level, such as the European Union’s Structural Funds. SMEs can also benefit from a series of non-financial assistance measures in the form of programmes and business support services.

The European Commission’s European Portal for SMEs http://ec.europa.eu/enterprise/sme/funding_en.htm presents details of the main European programmes available to SMEs and contains brief information as well as the main web sites for each programme. However, the information included on the website, is not exhaustive.

In addition, the Enterprise Europe Network provide information on both national and EU financial supports. The financial instruments mentioned on these sites are managed by the European Investment Fund and implemented via financial intermediaries or specialised funds, to which those interested should refer directly. The main Programmes are referred to below.

Under the Competitiveness and Innovation Framework Programme (CIP) 2007-2013, €1.13 billion has been allocated for financial instruments for the above period. These are organised under three schemes, which are managed on behalf of the European Commission by the European Investment Fund (EIF):

The High Growth and Innovative SME Facility (GIF) aims to increase the supply of equity for innovative SMEs both in their early stages (GIF1) and in the expansion phase (GIF2). GIF shares risk and reward with private equity investors, providing important leverage for the supply of equity to innovative companies.

The SME Guarantee Facility provides additional guarantees to guarantee schemes, in order to increase the supply of debt finance to SMEs. It concentrates on addressing market failures in four areas:

access to loans (or loan substitutes such as leasing) by SMEs with growth potential;

provision of microcredit;

access to equity or quasi-equity;

securitisation.

A Capacity Building Scheme supports the capacity of financial intermediaries in some Member States.

The decision of any eligible Irish undertaking, including financial institutions, to make an application under any particular EU scheme would be a commercial matter for the institution involved. Applications are between the undertaking involved and the relevant EU institution providing support. The Irish Authorities would not necessarily be made aware of individual applications made to EU support schemes which allow for direct applications. In relation to the SME Guarantee Facility, I am aware that one Irish microfinance lender benefits from the scheme.

The EIF’s own activities are based on two instruments:

EIF’s Venture Capital Instruments consist of capital investments in venture capital funds and business incubators that support SMEs, particularly those that are newly created and technology-oriented.

EIF’s guarantee instruments consist of providing guarantees to financial institutions that cover credits to SMEs.

This Programme is managed and the projects selected at national and/or regional level.

JEREMIE is a joint initiative of the European Commission and the European Investment Fund with the European Investment Bank. It aims to improve access to finance for micro to medium-sized enterprises and in particular the supply of micro-credit, venture capital finance or guarantees and other forms of innovative financing. JEREMIE is managed as an integral part of European Regional Development Fund programmes.

These schemes do not provide direct funding to SMEs, but are usually processed through financial intermediaries such as banks, credit institutions or investment funds. They are intended to increase the volume of credit available to SMEs and to encourage these intermediaries to develop their SME lending capacity .

The European Progress Microfinance Facility was launched in 2010 and is managed by the European Investment Fund (EIF) on behalf of the European Commission. Under the European Progress Microfinance Facility, €100 million will be made available, spread over four years from 2010 to 2013, to support employment, the development of micro enterprises and the social economy across all European Union Member States. It aims to increase lending activity to micro-borrowers through a wide range of financial intermediaries such as non-bank micro finance institutions, micro-banks, dedicated microfinance companies or investment funds, local savings banks, smaller cooperative banks, smaller development banks or institutions and selected commercial banks. As such, the EIF will not be providing direct financing to borrowers but will be facilitating lending through a range of financial support mechanisms. These supports will include guarantee instruments and funding of financial intermediaries.

The first support mechanism under the Microfinance Facility involves a micro-loan facility under which EIF will provide a guarantee instrument to financial intermediaries providing micro-loans. Availing of this facility will still require the intermediary to bear some element of the loan risk. Applications can be made to the EIF until 31 December 2013. It is the EIF’s responsibility to assess applications for guarantees and requests for financing from intermediaries, to present these requests to competent bodies for approval, to negotiate contracts with intermediaries and to monitor operations. Such applications are made directly to the EIF and do not require any national intervention.

Under EU Cohesion Policy 2007-13, the European Commission has a number of joint initiatives with the European Investment Bank and European Investment Fund aimed at improving access to finance using financing engineering instruments.

Under EU Cohesion Policy 2007-13, the European Commission has a number of joint initiatives with the European Investment Bank and European Investment Fund aimed at improving access to finance using financing engineering instruments.

One of these instruments is JASMINE (Joint Action to support microfinance institutions in Europe), a pilot initiative by the European Commission, the European Investment Bank and the European Investment Fund. JASMINE seeks to improve access to finance for small businesses and for socially excluded people and ethnic minorities, who want to become self-employed. This initiative, in line with the Lisbon Strategy for Growth and Jobs, aims to make small loans, or micro-credit, more widely available in Europe

In addition to the above Schemes, the European Investment Bank (EIB) provides support for Europe’s small and medium-sized enterprises (SMEs) to help mitigate the effects of the current credit crisis through a €30 billion facility to provide loans to SMEs through commercial banks. Participation in the facility is, in the first instance, a commercial decision for individual financial institutions, who are responsible for evaluating loan applications submitted by individual SMEs. Irish banks have benefited from the European Investment Banks (EIB) loans for SMEs. In 2009, the EIB made €300m available to Bank of Ireland, Allied Irish Banks and Ulster Bank for onward lending to SMEs carrying out investment projects. This was additional to €50m previously made available to Bank Of Scotland Ireland through its UK parent.

The Irish Enterprise Europe Network services in Ireland are delivered by Enterprise Ireland, together with Chambers of Commerce from Cork, Dublin, Galway, Sligo and Waterford and can be contacted on the following website address:

http://www.enterprise-ireland.com/enterpriseeuropenetworkireland

Any Irish SMEs or financial intermediaries wishing to obtain detailed information on accessing any of the European Funds outlined above or indeed, other European funding initiatives, should contact the Irish Enterprise Europe Network in the first instance.

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