Willie Penrose (Longford-Westmeath, Labour)
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Question 56: To ask the Minister for Enterprise; Trade and Innovation when the proposed 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. [2912/11]

Batt O'Keeffe (Cork North West, Fianna Fail)
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As I outlined to the House on several occasions in recent months, most recently on 2 December 2010 in reply to Question No. 98, 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.

Since my last reply, the working group has received updated analysis from Forfás and Enterprise Ireland to allow greatest possible targeting of any initiative on viable, innovative and growth-orientated SMEs who face a specific market failure, namely, where institutions have difficulty in applying existing credit policies and products. This can be, for example, due to lack of familiarity with certain sectors, markets and business models. Substantial progress has been made in identifying the critical elements involved in any further initiatives. However, in developing any further initiatives, it is important they complement, rather than substitute, the main banks' lending commitments and activities under the 2010 recapitalisation package, and that they represent value for money for the taxpayer.

The provision of credit to our enterprise sector, particularly SME's, should primarily come from a properly functioning banking sector and any additional initiatives on the State's part should not relieve the banks of their obligations in this regard. As indicated already, loan guarantees are just one of a range of possible measures being considered to address SME credit availability. Proposals in regard to any new measures will have to be considered by Government in the first instance.

Willie Penrose (Longford-Westmeath, Labour)
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I thank the Minister for his comprehensive reply. Is it not the position that the provision of credit to the enterprise sector, particularly SMEs, is of vital importance yet many small businesses, including family businesses, are being denied loans that are necessary to keep the show on the road? They are struggling to pay their bills and make ends meet.

Notwithstanding assertions from the banking sector on the renegotiation of loans, one might as well try to get a camel through the eye of a needle. Why has the proposed loan guarantee scheme promised for the purpose of assisting small viable businesses not been put in place, subject to the quite proper constraints outlined by the Minister? Does the Minister agree a loan guarantee scheme would be an essential tool to enable credit to flow once again for small viable businesses and would be their salvation? Will he indicate why the Department of Finance has such an aversion, distrust and dislike, and why it displays such heavy handedness, in terms of allowing this scheme, which is in incubation for nine to ten months, to come to fruition?

Batt O'Keeffe (Cork North West, Fianna Fail)
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I thank the Deputy for his acknowledgement that our priority is to protect taxpayers' money. We also want to ensure that the banks which have made a commitment of €12 billion up to 2012 meet that commitment. Mr. John Trethowan, who is leading the group that is working on a credit guarantee scheme, admits there is a sector within the broader SME sector comprising start-up, high-technology enterprises with whose business the banks may be not as familiar as they should be. We are working with him based on the updated Forfás report to examine this specialised area which encompasses some 2% to 3% of the overall loan requirement.

Our objective is to ensure there is an absolutely focused scheme in place that will meet the requirements of some of these start-up businesses which lack the necessary collateral and which are encountering a lack of expertise within the banks. In the case of an environmental company selling into the Middle East, for example, there is no great expertise in the banks to assess the viability of its operations. I have asked Enterprise Ireland to involve itself with the banks in terms of training and assessment of these new start-up companies. These are highly technical enterprises which need credit in order to sell their wares abroad.

Willie Penrose (Longford-Westmeath, Labour)
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I fully agree with that review and how it will be framed. However, we are not reinventing the wheel here. Similar schemes are in operation in some 95 countries across the world, including Britain, Singapore and Hong Kong. Those countries are not going to leave their Exchequers exposed any more than we would wish to do so. Nor do we want to remove the imposition upon banks to do the right thing.

Why is there a such a lack of progress in regard to a scheme which, as the Minister acknowledged, is of great importance and would target market failure in terms of ensuring support for businesses which have failed to secure credit because of insufficient collateral or a lack of expertise in the banks but which have demonstrated ability to pay? When does the Minister expect to be in a position to announce the inception of this scheme which has been called for by IBEC, the Small Firms Association and others? We in this House have been calling for it for months.

Batt O'Keeffe (Cork North West, Fianna Fail)
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The review group met in November and December last and another meeting is due. In the interim I have asked Enterprise Ireland to work with the banks. We are looking, for instance, at mechanisms that can be used by the banks to make use of the funds that are available under the European Investment Fund. That is also subject to review. I cannot give a date when the review will be completed. The updated figures will be reviewed by the committee at its next meeting and we will then have a more detailed report. After that, we will have to go back to Government with whatever recommendations emanate from that. It was the Government which put this review process in place.