Paul Connaughton (Galway East, Fine Gael) | Oireachtas source

I thank the Acting Chairman for the opportunity to contribute on this Bill. Providing greater ease of access to credit for SMEs is at the core of this debate. The scheme, which was established three years ago, sought to augment rather than replace conventional access to credit and it is important that the Government continues to review the scheme's operation and makes amendments where necessary.

More than €31 million has been made available through the scheme to date, resulting in the creation of more than 860 jobs and the sustaining of 600 others. However, the scheme has never fully met expectations and a review in 2013 provided some likely explanations for that. Inadequacies highlighted by the review are the subject of this Bill.

A crucial change being brought about by the Bill is the inclusion of non-credit products, such as invoicing, financing, leasing and overdrafts. The scheme's key to success is the fact that the State guarantees 75% of loans while benefitting on a number of fronts from the resultant job creation. Banks must still be prudent, given the fact that only three quarters of a loan is guaranteed by the State, but the scheme allows them in certain situations to provide finance to small and micro businesses that they would not otherwise consider. These are the businesses that will be the cornerstone of any revival in the country's finances. The credit guarantee scheme is just the type of commonsensical measure that is needed to kickstart job creation and ensure that entrepreneurs do not face needless obstacles as they seek to establish fledgling businesses.

Only approximately one quarter of SMEs anticipate that they will seek credit in the next six months, a figure that has remained relatively constant since late 2012. Meanwhile, the number of SMEs seeking credit has declined from 40% three years ago to 32% in the most up-to-date figures. Irish SMEs are more reluctant to borrow than their European counterparts, which is evidence of the depth to which the economy plummeted after the crash. Many SMEs that struggled to repay loans through the worst of the recession will remain shy of lending for many years yet and will only seek loans where investment or expansion will result in gains in the short to medium term. One element that may discourage SMEs from applying for funding is the high rejection rate for loans and overdrafts, which is consistently at more than 15% when the European average is closer to 9%.

The credit guarantee scheme has proven good value for money for the Irish people. The net cost per €100 million of lending is €1.8 million. When one sets this against the direct and indirect taxes collected, employment created and reduced social protection bill, the scheme's benefits become more readily apparent.

Some fledgling businesses will prove non-viable, but many will flourish and grow with proper support and have the potential to make a significant contribution to social and economic life. As a measure in the Action Plan for Jobs, the credit guarantee scheme has worked, but it has not fulfilled its potential. The measures contained in the Bill aim to ensure that the scheme can grow in the coming years and provide much needed money for investment in SMEs.

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