John Perry (Sligo-North Leitrim, Fine Gael) | Oireachtas source

I propose to take Questions Nos. 7 and 21 together.

My Department has introduced two targeted initiatives to support an additional flow of credit into the economy by filling gaps where specific market failures exist – the credit guarantee scheme and the microfinance loan fund. The guarantee scheme has been live since 24 October and is expected to provide an additional €150 million in lending for small businesses per year 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. For every €150 million of additional lending, the scheme is expected to benefit more than 1,800 businesses and create more than 1,300 jobs.

The second important initiative which we have developed and delivered upon this year is the €90 million microfinance loan fund to address access to credit and support lending to the most vulnerable cohort of our SME sector – the microenterprises. Microfinance Ireland opened for business on 1 October 2012 and is providing 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 are for amounts up to €25,000 and will generally be 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 and will, over a ten year period, generate close to 8,000 jobs at a cost of approximately €2,500 per job, which is very good value for the State’s investment.

My Department is keeping a close eye on developments in respect of both schemes as matters unfold to ensure their ongoing relevance and will adapt the parameters if, following review, it is deemed necessary. In addition, my 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.

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