Derek Nolan (Galway West, Labour)

I welcome the opportunity to speak on the Bill and I praise the Minister for being present for this Second Stage debate. There is no doubt that many businesses are struggling hard due to the lack of credit. I see it in my constituency every week. People who have shops in Galway city, Oranmore and the surrounding areas come to talk to me about the difficulties they are experiencing. Many of them are attributable to the dire economic circumstances of the country and the complete decline in consumer demand, but in many ways they are due to the relationship with their banks. Some of the stories I have heard are very disturbing. One example was a shop that was trading over Christmas. Its overdraft was cancelled on the day before Christmas Eve, when the company was in the middle of its peak trading period. It was a measure calculated by the bank to ensure it could stop the overdraft when the money was there and prevent the overdraft recurring in the new year. In other words, it cut off a vital cash flow and lifeline for that company.

I also hear from people in Galway about the heavy handed nature with which banks are treating them, especially small businesses. They are almost being bullied. The old relationship or approach banks had, where they would know the business, have a partnership relationship, understand the ins and outs of the business and work with businesses on an individual case by case basis, is being over-ridden by regulations and guidelines from the top applying to every business in the bank. These things are happening.

Another matter worth noting, given that we are discussing a Bill that specifically focuses on small businesses, is that many of the businesses the banks look after are very big, and they get priority. It is as if they are too big to fail. The banks cannot allow the big businesses to fail and must keep bankrolling them because if the bank incurs a loss it will be huge. On the other hand they can be much stricter and harsher on small businesses because the exposure level is so much smaller. There are huge concerns among the constituents I represent about how the banking sector works.

I congratulate the Minister for his work on the Credit Guarantee Bill. I spoke on that Bill, and it is very good legislation. I believe this Bill has great potential to re-orientate the economy. I view it as putting in place a scheme to help start-ups. There was a lack in this country during the boom time. We were very reliant on the sectors that worked, for example, foreign direct investment was working so we banked on it and construction was creating jobs so we banked on it. We neglected the very foundation that any country should have, an indigenous enterprise base. All companies must start somewhere, with some level of funding. It is usually a case of one person or two people having an idea and the drive and energy to pursue it, and this Bill and the fund it establishes will be a key measure in that regard.

On looking through the Bill I tried to find some lending guidelines, to indicate the type of companies that are being targeted. I thought section 10 might contain them but it does not. I understand the Minister will publish them separately. They will certainly be worthy of consideration and debate on Committee Stage because we must ensure that this fund is defined and that people know exactly what it is for, so it is not seen as a be-all and end-all for people with an overdraft problem, loan problem or credit problem. We must know exactly what it is there for so we can market it as such.

The scheme is to be integrated with the county and city enterprise boards, which are to be integrated with the local authorities. I hope all of that will be done in a single move. It should not be a type of one-stop-shop one calls to which then refers one to another office. We must ensure there is a link and relationship with those people, so the people who work in the renamed enterprise boards know the intricate workings of the scheme, have a good relationship with the managers and so forth. That will lead to a real flow of information to the people who require it.

It was mentioned in some of the documentation that the Credit Review Office can duplicate some of the functions. I realise the Credit Review Office's work only applies to two banks, Bank of Ireland and AIB, but it would be great if that office could declare, having reviewed the file, that there is a credit case for the enterprise, even though the bank was right to refuse it. To save the work being done again that file could be sent straight to the microfinance fund as a credible alternative source of funding. It it is deemed worthy of the criteria, we would again be saving the enterprise that extra hurdle and extra bureaucratic layer in seeking funding.

Again, I welcome the Bill. It is a very positive step. I congratulate the Minister and his Department on the work they are doing. The action plan for jobs is an excellent plan and the fact that it is being rolled out properly and on schedule is to be commended. I look forward to seeing exactly what the lending guidelines will be, but I have no doubt that the Bill will be a success. It will be very welcome to the small business sector and will ensure our economy generates indigenous enterprises to help us get out of the current mire.

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