Seán Sherlock (Cork East, Labour) | Oireachtas source

I thank Deputy Butler for raising this issue. As a Government, we have moved decisively to restructure the banking system and ensure that it provides credit to the economy every year. We are also acting to fill gaps where specific market failures exist.

The Deputy will be aware that the Department has introduced two targeted initiatives to support an additional flow of credit for small businesses into the economy. I attended the launch of the credit guarantee scheme this morning, which was presided over by the Taoiseach, Tánaiste and Minister for Jobs, Enterprise and Innovation, Deputy Bruton. The guarantee scheme will go live next Wednesday, 24 October, and is expected to provide an additional €150 million per annum in lending for small businesses over the next three years. Ulster Bank, AIB and Bank of Ireland are participating in the scheme.

The guarantee scheme is intended to address market failure affecting commercially viable micro, small and medium-sized businesses in two specific situations, namely, where businesses have insufficient collateral and where businesses operate in sectors with which the banks are not familiar. It provides a 75% State guarantee to banks against losses on qualifying loans to firms with growth and job creation potential. Each €150 million of additional lending under the scheme is expected to benefit over 1,800 businesses and create over 1,300 jobs.

Another important initiative developed by the Department is the €90 million microfinance loan fund to address access to credit and support lending to the most vulnerable cohort of our SME sector, namely, microenterprises. Microfinance Ireland was launched on 27 September and has been open for business since 1 October. It will provide loans primarily to newly established and growing microenterprises across all industry sectors, with commercially viable proposals that do not meet the conventional risk criteria applied by banks. Loans will be for amounts of less than €25,000 and will be generally provided for business start-up costs, expansion costs and working capital. The thrust of the lending policy will always be focused strongly on the potential sustainability of the business, its ability to repay the loan and the creation and maintenance of jobs. It is intended that the fund will provide loans to some 5,500 microenterprises over time, resulting in the creation of approximately 8,000 jobs at a cost of approximately €2,500 per job, which is extremely good value for the State's investment, when referenced against foreign direct investment.

To assist medium-sized business, we introduced the €150 million development capital fund scheme earlier this year. This will assist in increasing the availability of risk capital and closing the so-called equity gap experienced by SMEs seeking risk capital in excess of €2 million. The development capital scheme is aimed at addressing a funding gap for mid-sized, high-growth, Irish businesses with significant prospects for growth and job creation. Typical companies expected to benefit are those with in the region of 60-160 employees.

Further work with the banks is continuing to adapt to the needs of the non-traditional sectors, such as the technology and emerging sectors. Enterprise Ireland is working closely with the banks to develop propositions for exporters and technology companies that are suited to different stages of growth, including start-ups, early stage and mature companies and to adopt cash flow lending as opposed to the asset backed approach that has been the norm in recent years. Knowledge sharing is ongoing, including reciprocal secondments from Enterprise Ireland directly into the banks, sector briefings and trade mission involvement. In addition, the Department is working closely with the Department of Finance and the Credit Review Office to evaluate evidence on credit availability and to ensure that the amount of credit flowing to the SME sector is maximised to facilitate sustainable job creation and retention.

I refer the Deputy to pages 68 and 69 of the third progress report, which speaks further to the issue raised by him.

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