Marian Harkin (Sligo-Leitrim, Independent) | Oireachtas source

I am happy to have this opportunity to speak on the Microfinance Loan Fund (Amendment) Bill. On a personal note, for me it shows a real connection between the EU and what goes on here because nearly ten years ago I was one of the rapporteurs in the European Parliament on the microfinance fund when we set it up to help microbusinesses. It was an Irishwoman, Marie Donnelly, who led for the Commission in those discussions and we managed to pull together a fund that helped us support microbusinesses. The reason was that we wanted to send a clear message that the EU would help to support small business. It is very important, therefore, that this fund delivers.

Everyone in this House will agree that SMEs are the backbone of the economy. I believe 99% of companies are SMEs but most people might not be aware that 90% of businesses in Ireland are microbusinesses so they employ fewer than ten people. If we want to see those microbusinesses grow to become medium-sized businesses or larger companies, we have to make sure that they can survive for this length of time. All around us we see the devastation that is caused by Covid-19 so it is crucial that these microbusinesses can access the liquidity they need and sufficient grant aid. I will not raise that issue now. I have raised many times the fact that we need a much better balance between grant aid and loans but today we are talking about microfinance.

I discussed with the former Minister, Deputy Humphreys, on the floor of this House the terms that are in place for the microfinance loans. I think the interest rate is 4.5% or 5%, and there is a moratorium or a holiday for interest for six months. I told the Minister about many European countries and used the example of the Netherlands where the interest rate on microfinance is 2%. I did a quick back-of-the-envelope calculation which will not be a million miles out. I refer to a company borrowing €10,000 over three years, and that is accepting the six-month interest holiday.

The difference between repayments owed by a company here and those owed by one in the Netherlands is between €400 and €500. However, a loan of €20,000 repaid over five years would see a much more significant difference, around €1,500. That is a rough estimate. Many micro-businesses may not be able to make that kind of money and thus repay their loans. In that context I was pleased to see the Sinn Féin amendment which would introduce a 2% interest rate and a 12 month moratorium on interest. Perhaps I am not supposed to discuss that now. I do not know what Stage we are at but I am in the middle of making the point. I suggest looking at either one of those two initiatives. The Government should cap the interest rate at 2%, the rate charged in the Netherlands. If it cannot do that, it should look at the possibility of allowing an interest-free period of 12 months instead of six months. That would be very welcome news to a lot of companies.

Like a lot of Deputies here I am looking forward to seeing what is in the July stimulus. I am hoping to see big things. However, this microfinance fund does not respond to the real needs of some of our micro-businesses. We need lower interest rates or a longer period before interest is paid. This would make a huge difference to micro-businesses. It would give them hope. A lot of business owners are wondering whether to apply for this loan. The answer will partly depend on whether they can afford to make the repayments. They are wondering if they will make enough money to cover their costs, pay their staff, meet the costs of pay-related social insurance, PRSI, contributions, tax etc. and also make the repayments. A lot of businesses would look on this more favourably if we could lower those repayments by lowering the interest rate, allow a longer period without interest or both.

There is another important point. The Minister obviously wants these loans to be paid back. If the interest rate was lower, repayments would be easier and companies would be more likely to repay their loans. I am not suggesting that companies will not repay their loans, but lower rates would make it easier to do so. I will finish by calling once again for lower interest rates, a longer period of time without interest or both. Many micro-business owners would thank the Minister for this change because it would make a real difference to their chances of recovery. They know that when they start trading it will take a significant period of time to get back to where they were. Their costs are mounting all the time, including utility bills, insurance and so on. They are borrowing to cover that and they know their businesses will not start back where they left off. A little bit of hope will go a long way for a lot of people out there who want to start working again and get their companies up and running. That is why I support the Sinn Féin amendment.

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