Mr. Seamus Boland:

I thank the committee for inviting us to speak here. Irish Rural Link is a voluntary organisation representing rural community development groups all over the country. Our main motto is sustainable rural communities. In particular, we work with communities and people who are particularly disadvantaged by living in rural Ireland. Over the past number of years, we have been particularly struck by the reality that a large section of employment in rural areas is provided by the SME sector. We have a slide showing 99.8% active enterprises in rural areas and 68.9% of people engaged.

The sector has taken the greatest hit from the banking crisis mainly because people have been unable to get the kind of loans necessary to keep them in business. Mr. John Trethowan of the Credit Review Office clearly stated in his 17th report that this matter was of concern regarding SME and farm lending. The reality is the relationship between the sector and the banking community is so poor at the moment that people do not even seek loans. When one combines that situation and the fact that the number of SMEs has decreased by 8% in rural areas, according to the Central Statistics Office, we get the very clear picture that the sector is not enjoying the kind of recovery that we have been led to believe is in existence. That is mainly because of the banking situation.

Irish Rural Link has combined with our colleagues from Sparkassen in Germany, which happens to be the largest banking sector in this area in Europe. The foundation applies a 200-year old concept. As Mr. Bergmann will explain later, the foundation was spared the worst excesses of the banking crises and, therefore, protected the SME sector. We are particularly happy to bring this model of banking forward for consideration.

I contend that Ireland aspires to having a recovered and healthy economy, and one that is not subject to bumps and crashes on an ongoing basis. Part of that success has to be a healthy banking system. I ask members to look at the slide on the screens in front of them that shows the three pillars of the German banking system. They are the private commercial banks, the credit co-operatives that are the equivalent of our credit unions, and the Sparkassen public savings bank. That seems to us to be a major plank that is needed for a proper economic banking system to exist. The initiative is not new to Ireland. We had a type of public banking system when we had the ACC and ICC banks in place. It is not as if we have not tried this method before. At the moment we have a big gap between private commercial banks and the credit union and in the middle there is a sector that simply does not work.

Irish Rural Link has spent three years working on a business plan that has been submitted to the Department for Finance for consideration. We have considered the concept of locating eight regional banks around Ireland with each one independent of each other and bringing the money back into their communities and region. In effect, each of them would become an economic hub within their region. The idea is nothing new. It is 200 years old in Germany and Ireland has tried it before.

As far as we are concerned, the SME and farming sectors are the sectors that will create jobs and a sustainable rural community. We believe that the Government, which has given a commitment to this idea in its own programme, must work seriously with the stakeholders to make this happen. Irish Rural Link has carried out a lot of work on the legal possibilities of this idea and worked with Trinity College, etc. We believe that the Government must first recognise the need for a third pillar, which we had in the past and exists in Europe. We ask that the Government of the day seriously considers allowing this initiative to happen. Otherwise, we will have turned our backs on what has been successful in Germany and Europe and dismissed a banking system that has served the SME sector and rural communities very well.

Mr. Bergmann will explain the concept and how the model works in Germany.