Neale Richmond (Dublin Rathdown, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I am pleased to introduce the Microenterprise Loan Fund (Amendment) Bill 2024 here today. Essentially, the Bill will provide a statutory basis for the transfer of Microfinance Ireland into State ownership, under the remit of the Minister for Enterprise, Trade and Employment.

Before commenting on the specifics of the Bill, I wish to give some background on and context to, as well as an update on, the work of Microfinance Ireland. Microfinance Ireland was established in 2012 under the Microenterprise Loan Fund Act 2012. It provides unsecured business loans to viable small businesses that have both fewer than ten employees and an annual turnover of less than €2 million. It fills a gap in the market by lending to businesses that cannot obtain loans from other commercial lenders.

Microfinance Ireland makes its loans available to both start-ups and established businesses, across sectors. The amount of any one loan ranges from €2,000 up to €25,000. The loan term is typically three years for working capital purposes and can be extended to five years for capital expenditures. Interest rates range from between 5.5% for clients of local enterprise offices and other partners, going up to 6.5% for direct applications. These rates are well below what the market would charge for the level of risk involved.

Microfinance Ireland has also proved itself to be agile to meet the needs of small businesses facing unexpected events, responding quickly to those developments. For example, in the early days of the pandemic, it immediately pivoted to providing Covid-19 loans, providing vital liquidity before many of the State supports were in place. I myself saw that deftness and responsiveness at first hand. Last year, I requested Microfinance Ireland to offer loans for microenterprises impacted by the flood and other extreme weather conditions in October and November and it rose to that challenge within days. In addition to lending, Microfinance Ireland offers post-approval mentoring services free of charge to its lenders. These are delivered through the network of local enterprise offices.

Since its establishment in 2012, Microfinance Ireland has been a great success, fulfilling a unique role for microenterprises that are unable to secure finance from other sources. As of December 2023, it has approved a total of 5,052 loans to the value of €83 million, supporting over 10,000 jobs. These loans represent a wide geographical spread across the country, with 78% of those approved last year going to microenterprises outside of Dublin.

In light of that success and due to the importance of Microfinance Ireland in the financing ecosystem for small businesses around the country, the Government committed in its programme for Government to scaling up the organisation in order that it can support greater numbers of microenterprises and start-ups in future. As a first step to implementing that commitment, it was necessary to review the existing structures to ensure they could support such a scaling up.

Originally, the Microenterprise Loan Fund Act 2012 established Microfinance Ireland as a wholly owned subsidiary of Social Finance Foundation, SFF, which is a body that was set up in 2007 at the request of the Government, with funding from the Irish banking sector. SFF was created to address the needs of community organisations and social enterprises for loan funding that was otherwise unavailable from mainstream lenders and was set up as a body under the aegis of the Department of Finance.

Since then, there have been important changes to Microfinance Ireland’s working environment arising from changes at SFF and a substantial increase in its lending over the last few years. For example, since 2019, SFF is no longer under the remit of the Department of Finance, having become a private company limited by guarantee. In September 2021, the Strategic Banking Corporation of Ireland took over Microfinance Ireland’s debt funding from SFF, committing €30 million to increase Microfinance Ireland’s lending capacity and ability to assist more microenterprises. Moreover, the Microenterprise Loan Fund (Amendment) Act 2020 increased Microfinance Ireland’s limit of debt funding from €25 million to €100 million and the permitted Exchequer funding went up from €25 million to €95 million. The Minister for Enterprise, Trade and Employment is accountable for any Exchequer funding to Microfinance Ireland.

Given all this, our Department conducted a review of Microfinance Ireland’s governance structures to assess if amendments were needed to support the Government’s ambitions for Microfinance Ireland. That review recommended that Microfinance Ireland come into State ownership to provide greater alignment between the ownership and the funding arrangements of the organisation. In the context of plans for expansion, it makes sense to have a direct link between the Minister who is accountable for the public funding and the organisation in receipt of that funding, namely, Microfinance Ireland. State ownership will also give improved security about the future of Microfinance Ireland as it was originally established in the legislation with a sunset clause. The Government has accepted that recommendation and SFF, which participated in the departmental review, has agreed to relinquish ownership to the State. The Bill before the House today gives effect to that change.

Turning then to the main provisions of the Bill, it amends the Microenterprise Loan Fund Act 2012 by amending existing sections in that Act and inserting some new provisions. In the first instance, it provides for the authorised share capital of Microfinance Ireland to be transferred from Social Finance Foundation to the Minister for Enterprise, Trade and Employment. As mentioned earlier, the 2012 Act created Microfinance Ireland as a subsidiary of SFF. A consequence of the transfer of the authorised share capital to the Minister is that Microfinance Ireland will no longer be a subsidiary of SFF. Accordingly, several of the provisions in the Bill delete references to “subsidiary” from the 2012 Act and replace them with Microfinance Ireland’s full name. These are technical changes to the 2012 Act.

The Bill inserts, in section 9, new governance structures. Although the current structures in Microfinance Ireland already have many of the features of the governance that applies to State bodies, it is necessary to make some changes as a consequence of the change of ownership. As things stand, SFF appoints the board of directors of Microfinance Ireland. This Bill provides that the Minister for Enterprise, Trade and Employment will appoint the directors, including the chairperson, following the change in ownership. The Bill requires that the maximum number of directors be ten, with a quorum being six. There are standard provisions with respect to the payment of allowances, the resignation and the removal of a director, and there are continuity provisions for directors before and after the change of ownership. The Bill goes on to provide that the board will appoint a chief executive officer with the consent of the Minister. Here, there are provisions on the role, terms, conditions, remuneration, and removal, of the CEO. Section 9 also states that the CEO will be accountable to the Committee of Public Accounts and to the Oireachtas Committee on Enterprise, Trade and Employment.

Section 13 of the Bill introduces superannuation arrangements for the staff of Microfinance Ireland. This requires Microfinance Ireland to prepare and submit a superannuation scheme to the Minister and for it to be approved by the Minister with the consent of the Minister for Public Expenditure, National Development Plan Delivery and Reform.

In conclusion, the Bill will provide for greater security for Microfinance Ireland and a more efficient governance structure for the organisation. As the senior Minister, Deputy Coveney, has responsibility for other agencies such as the local enterprise network, with which Microfinance Ireland does so much work, I also see opportunities as a result of this Bill for greater cohesion between those bodies on whom so many microenterprises depend for support and assistance. I therefore commend the Bill to the House.

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