Willie O'Dea (Limerick City, Fianna Fail)
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Question 59: To ask the Minister for Jobs; Enterprise and Innovation if he will announce measures to tackle the credit shortfall faced by businesses here, particularly the small and medium enterprises; and if he will make a statement on the matter. [36212/11]

John Perry (Sligo-North Leitrim, Fine Gael)
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A key priority of the programme for Government is to ensure an adequate supply of credit is available to fund small and medium-sized enterprises. Work is well advanced in my Department on realising our commitments in terms of the temporary partial credit guarantee scheme and the micro-finance loan scheme. The design phase of the temporary partial credit guarantee scheme has been completed and formal proposals will be brought to the Cabinet shortly. Once the design is approved by the Government, a further request for tender will be published to select an operator to allow for the roll-out of the scheme in the coming months. In parallel with the work taking place on the scheme's design, my Department is preparing primary legislation to make the necessary statutory provision for such a scheme.

The micro-finance fund to provide loans for small businesses is also being developed by my Department. This proposal is being designed to stimulate lending to sustainable micro-enterprises. It is targeted at start-up, newly established or growing micro-enterprises across all industrial sectors employing not more than ten people. It will provide loans of up to €25,000 for commercially viable proposals that do not meet the conventional risk criteria

The Minister for Finance has restructured the banks and deleveraged the banking system. This is the principal response to the problem of making credit available through banks. These initiatives have ensured the capacity for the pillar banks to lend to SMEs and other important sectors is in excess of €30 billion during the next three years. The Government has imposed lending targets on the pillar banks for the three calendar years from 2011 to 2013. Both banks will be required to sanction lending of at least €3 billion this year, €3.5 billion next year and €4 billion in 2013 for new or increased credit facilities for SMEs.

Businesses having difficulty with credit refusals can use the services of the Credit Review Office which will carry out an independent and impartial review of the banks' decisions to refuse or reduce credit. The office will also monitor the performance of the banks in meeting their lending targets.

Willie O'Dea (Limerick City, Fianna Fail)
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The Minister of State referred to the recapitalisation of the banks, but does he realise that it is not working, that there is a credit famine and that the financial institutions are once again trying to hoodwink the people with their figures, many of which are accounted for by restructuring and replacing existing funds? In the programme for Government, the Government made a significant promise to introduce specific policies to make more credit available to small business. The problem has become more acute since the Government took office, yet we have seen no policies introduced. How much money does the Government propose to guarantee in the loan guarantee scheme?

John Perry (Sligo-North Leitrim, Fine Gael)
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Regarding the 200,000 small companies and the credit supply of €30 billion for business, the banks will be monitored closely. Many are employed in small companies. Thanks to the legacy of the previous Government, small companies are encountering difficulties because of a lack of demand. Companies which were viable three years ago are now under considerable pressure.

Willie O'Dea (Limerick City, Fianna Fail)
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What lack of demand?

John Perry (Sligo-North Leitrim, Fine Gael)
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The micro-finance loan scheme is before the Government and will be sufficient to meet demand. Each loan will provide up to €25,000 for start-up companies and people with ideas in order that enterprise might be encouraged. The scheme will be important, as the banks are not meeting the level of demand. I agree with the Deputy that all the evidence indicates that people are experiencing significant difficulties. This is evident from the number of closures and the lack of confidence in the commercial sector. The partial loan guarantee will not substitute for the banks, but it will provide a level of comfort for clients seeking loans from banks.

Willie O'Dea (Limerick City, Fianna Fail)
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How much will be guaranteed?

John Perry (Sligo-North Leitrim, Fine Gael)
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Does the Deputy mean in the loan?

Willie O'Dea (Limerick City, Fianna Fail)
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Yes.

John Perry (Sligo-North Leitrim, Fine Gael)
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I am open to correction, but the ratio will be 50:50.

Willie O'Dea (Limerick City, Fianna Fail)
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What is the total figure for the amount to be guaranteed?

John Perry (Sligo-North Leitrim, Fine Gael)
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The exact figure must be signed off by the Government. It is not for me to announce it in the Chamber. When the scheme is announced by the Government, the figure will be more than adequate to meet demand.

Willie O'Dea (Limerick City, Fianna Fail)
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I heard what the Minister of State said about the last Government but the problem is that businesses starved of credit are worried about what this Government will do for them. Deputy John Perry is in government now and people are looking to the Government to do something to make financial institutions lend some of the capital stuffed into their coffers. The Minister of State said it is widely known that the figure for the micro-finance scheme will be €100 million. I note the refusal of the Minister of State to say how much will be guaranteed under the partial loan guarantee scheme but some of his civil servants, during the debate on Committee Stage, have mentioned a figure of €300 million-€400 million. For the end of March 2011, the amount of loans to SMEs outstanding in this country was €58.2 billion. This represents a decline of €7 billion over the course of the year. Can the Minister of State explain what impact a couple of hundred million euro will make in this situation? Does he agree that a more radical approach is needed?

John Perry (Sligo-North Leitrim, Fine Gael)
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There are several options at the moment and the €32 billion ring-fenced over a three-year period for SMEs is very important. The taxpayer and the Government have recapitalised the banks. It is critically important for domestic banks to have profitable SMEs and SMEs need good banks. It is a win-win situation. The banks are duty bound. On the basis of my discussions with banks and based on the evidence on the ground, people are being refused credit and existing loans have been re-financed. We must have straight talk from the banks and the Government will monitor them. With regard to the funding of micro-finance, the last Administration did nothing. The matter was talked about for years prior to the change of government-----

Willie O'Dea (Limerick City, Fianna Fail)
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What the Government proposes to do now will be worse than useless.

John Perry (Sligo-North Leitrim, Fine Gael)
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The last Administration promised it for two years.

Willie O'Dea (Limerick City, Fianna Fail)
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This Government has promised it for a year.

John Perry (Sligo-North Leitrim, Fine Gael)
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The people who did not cause the recession are the people now paying a huge price. This is the legacy of the last Government, which closed the viability of small businesses.

Willie O'Dea (Limerick City, Fianna Fail)
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People want to know what this Government will do. What will this Government do? Will the Minister of State focus on that?

John Perry (Sligo-North Leitrim, Fine Gael)
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We will do much more than the last Administration, which did nothing for small businesses.

Willie O'Dea (Limerick City, Fianna Fail)
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The Government is taking its time.