Willie Penrose (Longford-Westmeath, Labour)
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Question 69: To ask the Minister for Enterprise; Trade and Innovation when the proposed government-backed loan guarantee scheme for viable small businesses will be established; the criteria that will be used for qualification of the scheme; and if he will make a statement on the matter. [36633/10]

Batt O'Keeffe (Cork North West, Fianna Fail)
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The provision of credit to our enterprise sector, especially SMEs, should primarily come from a properly functioning banking sector and any additional initiative on the State's part should not relieve the banks from their obligations in this regard.

However, the Deputy will be aware that my officials are working with their colleagues in the Department of Finance, the Credit Review Office, Enterprise Ireland and Forfás to address access to credit issues for viable SMEs, including the option of a loan guarantee scheme to assist the working capital requirements of SMEs. The most recent meeting was held on Monday last, 11 October. A range of issues relating to SME credit were discussed and follow up action is under way.

These meetings are aimed at building on the already substantial progress that has been made in identifying the critical elements for further initiatives. It is important that any new initiatives complement, rather than substitute, the main banks' lending commitments and activities under the recapitalisation package and that they would represent value for money from the taxpayer's perspective.

The Deputy's question refers specifically to criteria to be used in any new scheme. While the specific issues are still under discussion, it is possible that a new initiative would only apply to commercially viable businesses that, despite having demonstrated the ability to repay, were unable to secure lending facilities due to known market failures. An example of such a failure would be lack of information concerning certain business sectors, certain types of business models and many foreign markets.

While the Deputy's question focuses on loan guarantees, this is just one of a range of possible measures being considered to address SME credit availability. Proposals for any new measures will be considered by Government in the first instance

Willie Penrose (Longford-Westmeath, Labour)
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I thank the Minister for his reply. It is amazing that this review is ongoing since June 2010. Does that demonstrate a mind-boggling level of apathy and lethargy, in the context where small family businesses across the country cannot get the loans they need to keep the show, paying bills to suppliers is a struggle, viable, profitable and well-run businesses are going to the wall because they cannot access credit, and two years on from the introduction of the blanket guarantee our banking system remains in crisis? We were promised that the guarantee, NAMA and the recapitalisation of the banks would assist, but the banks are risk averse.

What is the reason for not proceeding with this measure? Will the Minister not tell us the truth of the matter? Is it not the that heavy hand of the Department of Finance, to which I referred in early July, has claws across the introduction of this scheme and is ensuring it does not proceed from the incubation phase? That is what is going on. Why are we the last country in Europe that has not introduced such a scheme? It is not as if we have to reinvent the wheel. Such a scheme is operating in Britain, China, Singapore and Hong Kong. What is wrong here? Why are we different?

The Minister wants to ensure that additional moneys will be provided under such a scheme as opposed to moneys in substitution for funds that he expects will be provided. Furthermore, he wants to ensure that the banks would not be left off in meeting the obligations they have. Was a report not prepared by Forfás as part of the deliberation process? What is contained in it and when will it be published?

Batt O'Keeffe (Cork North West, Fianna Fail)
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I thank the Deputy for this opportunity to pay tribute to the Minister for Finance for all the initiatives he has taken. I indicated that this matter would be brought to the Cabinet and it was brought to it in July without any fanfare. The decision at Cabinet was that we would be given a mandate to work with the Department of Finance and the Credit Reviewer to examine the possibility of introducing a loan guarantee scheme. Meetings on that are ongoing and the last meeting with my officials, the Credit Reviewer and Department of Finance officials took place last Monday.

It is important to point out matters, which the Deputy skimmed over, namely, that we have recapitalised the banks and have assured SME businesses there will be €12 billion available to them by way of credit. All the Ministers of State present went on a roadshow to meet SMEs around the country, get feedback and interact with the banks, and that has been done. We are delighted there has been an improvement in the overall position.

The Minister for Finance put in place a Credit Review Office to examine the operation of the banks, ensure they are lending to SMEs and to report back on a regular basis. The Minister has also put a statutory code in place. The Department of Finance and the Minister are understandably concerned to ensure that the banks must not be left off the hook and I agree wholeheartedly with the Minister on that matter.

Willie Penrose (Longford-Westmeath, Labour)
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What we envisage is a co-guarantee in terms of risk sharing with the banks making a decision on a loan application and the Government stepping in to guarantee 50% of the loan. The benefit of such an arrangement is that there is an alignment of interests between the loan originator and the guarantor. I know the Minister has concerns in that there are ventures for which there is low collateral. They may be new types of ventures and the banks are risk averse to those. Surely the Government can intervene in the case of specified areas and deal with those applications. As we saw on "The Frontline" programme on Monday, there are innovators waiting to take the plunge. We should push them along the way by removing the obstacles and facilitating them.

Batt O'Keeffe (Cork North West, Fianna Fail)
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I am glad the Deputy said there are specialist areas because that is our belief. It is also the belief of Forfás, which issued the report. It indicated there were specialist areas where it may not be possible for the businesses concerned to obtain a bank loan and that in such areas the State should step in. We are fairly positive that we can do so in certain circumstances. However, the message must go from here that any guarantee would apply to only 2% to 4% of loans. It is important to stress that point because such a guarantee scheme cannot be the panacea, as Mr. John Trethowan said, for all the ills in terms of businesses seeking credit.

We target what we do in this sector. We want to give additionality, particularly to the technology sector because businesses in that sector will have no collateral or cash and it will be important for those businesses to be driven to enable them to grow.