Dara Calleary (Mayo, Fianna Fail) | Oireachtas source

At long last the Bill has finally arrived. Deputy Tóibín and I have been identifying problems with the credit guarantee scheme since early 2013. The Minister committed to a review, which he completed in 2013. It is not good enough that it took so long although the fault is not with the Department. This was a scheme that had potential to be hugely important and beneficial. It has taken so long to deal with the difficulties that were identified early on in its lifetime that many people will not get the opportunity to avail of it. I will come to some of those difficulties later and on Committee Stage.

The measures outlined in the Bill must result in the scheme improving lending to SMEs. It was identified in the OECD report on competitiveness that we have fallen since last year in terms of access to finance by SMEs. Within the last 24 hours, Bank of Ireland announced its decision to restrict cash dealings. That does not just affect older people and rural communities but also many SMEs, particularly those in the service sector which have already been hit with serious lodgement charges. They have been told on what days they can and cannot lodge coin, and now they are being told they can only lodge over €3,000. That means a lot of businesses are going to be keeping cash on their premises. This is not good enough and it shows the need for something radically different in respect of SME finance. The Bill goes some way towards achieving that but we have a long way to go. The Minister of State's party made a commitment in its manifesto and there is a Government commitment to a new business bank. What we have is a strategic banking corporation which is more of an agent or wholesaler using the existing banks. It has not made the difference or put the cat among the pigeons in terms of challenging the existing bank network to address SMEs and come up with new products.

The first problem with the credit guarantee scheme, which was identified at its inception, is the cost of the scheme and the premium on it. It is high-risk lending and a high-risk product, but the cost is too prohibitive for many businesses. This has not been addressed. The scheme was launched in October 2012 amidst the usual spin that comes with everything this Government does. It was supposed to provide €450 million over three years, which was the aim and expectation created. We now see that it has only just managed €1 million a month, so to get to the €450 million we would need another 35 years. The Minister of State, myself and everybody else in this Chamber will be well gone out of it in 35 years. The scheme needs radical surgery. The Bill goes some way towards doing that, which is why we will support it on Second Stage. We will, however, be tabling some amendments on Committee Stage.

The review of the scheme was damning and I welcome the Minister of State's willingness to commission and publish it. We need urgent responses and that is not understood in the Attorney General's office. A product like this is directly relevant to business and businesses are hungry for it. While best practice must absolutely be observed, it must also be acknowledged that the market is fluid. The product was badly needed over the last years and there was not time for it to be left waiting in an in-tray.

I always note that the amount that was sanctioned for these schemes is given. I would like to see the amount that has been drawn down. There is always a big difference between bank lending figures for what has been sanctioned and those for what has been drawn down because the conditions around drawdown at the moment are so strenuous and expensive that it does not happen for many people.

I refer the Minister of State to the report of the SME advisory group of 2012 which focused in particular on the old banks' obsession with personal guarantees. I remember how representatives of the SME advisory group zeroed in on personal guarantees when they appeared before the Oireachtas Committee on Jobs, Enterprise and Innovation. The Credit Review Office and the Credit Reviewer, John Trethowen, re-emphasised their criticisms of these and the committee will have the chance to discuss that with him next Tuesday. Are there views within the Department and the Government about the continuing reliance of the banking system on personal guarantees and the fact it is an ancient way of doing business? It belongs to the Vikings. That personal guarantees have been exposed as a very weak instrument over recent years should surely challenge the Minister of State to do something else.

I am interested in the proposal for State promotional financial institutions. What does that mean in English as opposed to Department-speak? Is it a new bank? Is it a new ICC? Is it a marketing organisation? Will it be another version of the SBCI that will act as a wholesaler and push that money out through the existing pillar banks?

I have spoken in detail about the change the Government introduced earlier in the year relating to banks exiting markets and facilitating the credit guarantee scheme to people whose loans are being sold, but there is still an issue with banks staying in the Irish market and selling their loan books. I refer specifically to Ulster Bank. The businesses, many of which are viable and trading profitably but are left with legacy loans from decisions made, find their loans being sold overnight to various companies. We heard all the usual suspects mentioned in respect of the other NAMA portfolio. For this to be most effective, we need to extend it to banks who are staying in the market and give every business whose loan is being sold the chance to buy or bid for that loan using the credit guarantee scheme. It must be said that the pillar banks - AIB and Bank of Ireland - are engaging. I think they are using SBCI funds to do that but there is an anomaly whereby if a person has a loan with a bank that is exiting the market, the credit guarantee scheme is there to support him or her, but if his or her bank has not taken that decision, he or she is not supported. Surely there is something radically unfair about that.

The issue of expense needs to be examined. In respect of the messaging of the scheme, perhaps the Minister of State will reflect on what the review said in its summation of the previous scheme. It said it was overly complicated, offered a narrow range of lending products and skewed the risk in favour of the State. That is pretty damning from a Government-appointed review and we need to ensure this scheme is accessible and not too expensive. I am still not convinced the premium reductions are enough, particularly in the context of 2015-2016 versus 2012-2013. Many businesses in this space are now stronger and have stronger trading accounts to back this up. If it is to make a difference in the market, the pricing of this product needs to be reviewed.

I am also very concerned about the disparities in regional lending rates which the Minister of State quoted. I have no doubt that businesses in Donegal, Sligo, Leitrim, Cavan, Monaghan and Louth are expanding and want to use this facility. We must look at why they are so low in terms of the national proportion. It is the same in Galway and Mayo. Again, the Department is constantly pushing a recovery that is Dublin-centric and Dublin-centred. A role for monitoring not just the credit guarantee scheme but the work of the microfinance scheme and the lending done by the LEOs should be stitched into the regional job action plans, on which the jury is still out, to ensure there is not such a regional disparity. It does not even come down to the value of lending. The number of credit guarantee schemes granted in Dublin, Kildare, Meath and Wicklow is 72, whereas in counties Louth, Monaghan and Cavan, the number is five. This does not seem to add up. There needs to be a focus on this and work needs to be done to ensure businesses in these regions are aware of the scheme and what can be done through that scheme.

The Minister of State referred to the necessity of looking at new and non-traditional sources of lending. I had hoped to speak on the Finance Bill but owing to the guillotine the Government imposed, I did not get the chance. We must look at crowdfunding. There is some movement towards it in the budget but nothing like what we need to do radically to support business. We need to encourage more investors to come into it. Rather than taxing their returns, which are minimal, with full USC and PRSI, we need to give crowdfunding a break and incentivise people to use it to lend to businesses, especially smaller businesses and start-up businesses in existing sectors which find it very difficult to get grant and loan support. There is so much that could be done around crowd financing through the LEO network and Microfinance Ireland if we made it more successful.

We have ignored and continue to ignore the role of the credit union movement in terms of SME lending. The Minister for Finance seems determined to freeze the credit unions out of this economic recovery even though they are the foundation of many societies, a locally led recovery and, in 90% of cases, responsible lending, unlike many of the pillar banks. Credit unions must be given a role in what the Government defines as non-traditional sources of SME lending.

This is important. I am frustrated by the delay. Again, I emphasise that I know the delay is outside the control of the Department but now that this will be passed by both Houses over the next month, we need to get it out there. It needs to be promoted and pushed. I am not sure the traditional pillar banks are good at doing that. They certainly did not put their shoulder to the wheel in terms of promoting the credit guarantee scheme in its old inception. I am very intrigued by this State promotional financial institution but in terms of selling and promoting it, that is the purpose of the LEOs and Microfinance Ireland. They have shown themselves to be able for the task, particularly Microfinance Ireland in the past 18 months. We need to get it out there and promote it. I look forward to giving some clarification on that. We will support it on Second Stage and will table a number of amendments to reflect what I have said.

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