Éamon Ó Cuív (Galway West, Fianna Fail)

Section 10 states that the Minister will set out the maximum amount that can be lent to microenterprises. I was involved in setting up a number of enterprises, and getting the first loan was not the biggest difficulty. It was when we tried to get beyond our little industry to make it a proper industry that we hit the wall.

If we are talking about average loans of €16,000 and €90 million over ten years, which is €9 million a year, the reality is that someone who sets up a business will find very quickly that this kind of money will be petty change in their pocket. That is the hard reality for most businesses that will have any kind of significant employment.

I was a great advocate for just starting the business and figuring it out later. It is just as well we did it that way because if we had not we would never have set up a new business. I have no doubt that if everything we had planned to do was analysed carefully at the beginning, the flaws in what we intended to do would have been seen. When we set up the timber mill we had no three phase electricity and therefore we got a tractor and put the machine for debarking the timber on the back of it. We needed a treatment plant. We bought that and put it on the single phase electricity. We then realised there were problems getting trucks to bring the timber in and out of the forest and, lucky for us, we managed to get some assistance to get that sorted out. We found it was not as simple as we had figured out because timber was coming in that was not suitable for our equipment and we had to keep growing it.

The problem with this is that in terms of going from finance provider to finance provider, when a company gets to a certain stage of a problem as well as to a certain stage of growth - at €16,000 it will not be a very big company - many of them will get into trouble. In terms of my experience, we were lucky. The one wise decision we made was to bring in North Connacht Farmers, now Connacht Gold, as a partner. It had resources and it also had a market for us and, therefore, I did not have to worry about the market in the short term.

I am not saying this to be negative. I am saying it because I often find that a business always works out at the initial stage when the idea is written on a bit of paper. One will do the figures to make it work out because if one did not do that one would not even start the business. However, when one actually starts, and it is similar to somebody saying they are going to build a house for a fixed amount of money, one suddenly realises that there are things one had not thought of or provided for that needed to be done and issues that needed to be solved. In terms of the actuality of people's lives, everybody who started a business will say that they underestimated the difficulty of setting up a business, particularly anything in manufacturing.

Where one really hits the wall is on the phase 2 operation, in other words, when one is under real pressure. It is costing more than one thought and one goes back to the bank and says that at this level it will not work. My worry is for someone in the microfinance process. The company has set them up. It has given them a loan of, say, €15,000 or €16,000 to get them started but when they realise that amount will not get them business and that they are not making the profits they had predicted, that is when they really need the faith and the help.

For that reason, the limit the Minister will impose under section 10 will be vital. The question of whether the microfinance lender can remain with that person and give them more money will be vital because most people who start in business run through the dark hours of it going wrong. Some of the most successful businesses needed that great leap of faith, the second loan, the loan that provided when everything was not going according to plan. It is very important that we examine how that will be provided.

I hope that we will get acorns out of this measure that will grow into oak trees. I agree that microenterprises are important but we must be clear that if we are talking about a microenterprise employing only one or two people, we will be a long time solving the unemployment problems of the country if we have to do it that way. I presume what the Minister would hope for in reality is that these enterprises would grow and employ ten to 20 people, or even more than that. We were luckier. The business we started on the back of a hill is employing multiples of that number.

This is important but I have had this argument about Leader funds over the years and with the de minimis rule in Europe set at €200,000. I have argued time and again that I do not believe a substantial industry employing ten or 20 people can be set up with that kind of grant aid. It is not sufficient because the cost burdens in setting up a business are very significant, particularly if it is a business in the manufacturing sector. I welcome this measure. Nobody could go against it, but it is very finite. Any idea that this is a major panacea, at €10 million a year, in terms of dealing with the major problems of unemployment is wide of the mark.

The second issue that we must examine is the length of time given for repayment. There is a presumption that a business gets into profit quickly but many companies find that when they start in the real world, so to speak, they do not get into profit fast. What they want are more borrowings without any repayments, and the big advantage of a grant over a loan is that they do not have to repay the money. The time given for repayment is vital. Based on all my experience of dealing with other people who were involved in setting up businesses, and having been involved myself, I believe we must give reasonably long timescales for people to pay back loans. In the first year it would be very difficult even to service the interest on a loan, never mind the capital on a loan.

There is much work to be done on the enterprise sector. I never agreed with the European Union attitude towards state aids where, for example, under the Leader programmes it has the de minimis rule of €200,000. I can never understand the logic that giving a grant of €300,000 or €400,000 to a small industry in the far west of Ireland will in some way upset the free trade of Europe or in some way be unfair competition, regardless of where one is on this island, with an industry located on the main territory of Europe which does not have to travel across two seas to get its goods onto the large European market. Europe could look to America and learn some lessons there. I recall as Minister travelling to Europe and arguing with Commissioners that their de minimis rule and their attitude towards state aid was very negative and over-restrictive.

I remember visiting Wisconsin and being told that an American state can give any grants it wants.

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