Tuesday, 10 July 2012
Microenterprise Loan Fund Bill 2012: Report Stage
I move amendment No. 3:
In page 8, to delete lines 33 to 37.
Ba mhaith liom labhairt ar an dá leasú eile. I understand why amendments are ruled out of order. Generally, it is to ensure there is no extra cost to the State. However, the reason we are here is to provide micro finance to small emerging businesses, who are desperately in need of this oxygen to survive and grow. Every Member of the House is convinced about this and that the amount of money necessary is much larger than €10 million. In amendment No. 1, I replaced the figure with the phrase "an amount to be determined by the Minister". In amendment No. 2, I sought to delete the figure of €15 million and to substitute "an amount to be determined by the Minister". Surely "an amount to be determined by the Minister" does not in itself incur an extra cost on the State. It is a great disappointment because we went as far as we could to ensure it would not put a cost on the State but would leave the door open to the Minister, in his judgment, to deal with increased demand in the future.
There is no need to worry, a Leas-Cheann Comhairle, as I will get through the amendments as quickly as possible. I will speak to all of the amendments if necessary because all the surviving amendments deal with the same issue, the governance of the micro finance fund.
Section 12 deals with the governance. During the debate with the Minister on Committee Stage I asked him what would be the cost benefit analysis of the Minister providing a vehicle, of which he would have direct control, for this micro finance fund. The worry we communicated very strongly on Committee Stage was that the governance of this vehicle was at arm's length from the Minister and we asked for a cost benefit analysis of that. The Minister said he would deliver a cost benefit analysis, that is, a compare and contrast exercise for a different type of vehicle to be used from the one proposed in the Bill. Microfinance Ireland is accountable to Social Finance Foundation, SFF, including for the appointment of the board. While the Minister has some oversight, due to company law he will not have tight control over the organisation.
We also asked what would the difference be for SFF to move from a wholesaler within a sector to a retailer within a sector and how that would change the sector itself. I am not sure if the Leas-Cheann Comhairle would prefer me to speak to the amendments individually or to all of them together.
We debated these issues on Committee Stage. Before discussing amendment No. 3, I wish to clarify a point. In case Deputy Tóibín believes there is just €10 million available for lending from this fund, the sum of €10 million is the equity going into the micro finance fund from the Department's budget. That is the equity on which borrowings of up to €25 million can be leveraged. In addition, the capacity to provide an additional €15 million in equity is permitted under the legislation. As we discussed on Committee Stage, the capacity of this fund, which is €10 million in equity and a maximum of €25 million in lending, is to lend an estimated €40 million over the next few years. The additional equity would allow for leverage up to the €100 million target we have set overall.
While I understand Deputy Tóibín's anxiety that micro finance play an important part, we have conducted much analysis of the level of demand for this type of lending vehicle and we are satisfied, on the basis of the assessment, that this will meet all the needs. However, considerable headroom has been built in so even if demand exceeds our expectation, there is plenty of headroom under the legislation. The advantage from the point of view of this House is that we will have to come to the House to secure its permission to increase the equity and Members of the House will have an opportunity to examine the success of the scheme. It is not bureaucracy but striking a balance between the two. While I understand what the Deputy is trying to do, I believe this is fair, reasonable and based on good practice in the House.
Amendment No. 3 is probably not adequate to achieve what the Deputy desires. The purpose of section 12 is to set out the name of the subsidiary and identify its share capital and ownership. Sections 3 and 4 list the share capital of the subsidiary as €1, which will be issued to Social Finance Foundation. It is indicated that the share capital cannot be revised without the consent of the Minister. The amendment seeks to remove the limitation on the share capital and the inalienability of the share. It offers no alternative structure for the subsidiary and the intent of the amendment is not clear.
As I understand it, the Deputy is concerned the Minister will not have sufficient belt-and-braces control over the operation of the fund. The Deputy proposes a fully fledged State-sponsored body. In the time available, the costs and benefits could not be detailed in a comprehensive paper. There are really no great benefits and only costs arise from the Deputy's proposal. What he proposes would require a full-time, permanent staff and executive. We would have to commit to pay and pensions in respect of the positions if they were created under a fully fledged statutory State body appointed by the Minister. It would be a much more inflexible tool and would be much more costly to put in place.
The Deputy asked whether the Minister would have sufficient controls to ensure the board will act in accordance with public policy and not go on a solo run. I can provide him with assurance. The board will be appointed by the board of Social Finance Foundation but following consultation with the Minister for Jobs, Enterprise and Innovation and the Minister for Public Expenditure and Reform. The board will consist of key stakeholders, including the Social Finance Foundation, the banks, the county enterprise boards or local enterprise offices, First Step Microfinance and other appropriate organisations. The board will have experience in micro-finance. It will meet quarterly and will provide regular updates on progress to the Minister. It will publish annual reports, which will be available to the Houses. Financial statements will be laid before the Oireachtas and there will be an audit and risk committee to oversee performance. There will be a credit committee.
The body's memorandum and articles of association will set out its remit and this will be a published document. The scheme I will be laying before the Houses will be the one in accordance with which the body will be delivering services. The body will be subject to audit by the Comptroller and Auditor General, as with every other State body. The due diligence of the European Investment Fund in respect of micro-finance agencies will apply. Deputy Tóibín is very keen that we draw on this. We have been drawing on it only to a limited extent to date under First Step Microfinance. There will be a due diligence procedure protecting the relevant moneys, including those of the State. We have committed ourselves to an internal review and to publishing a review after two years. The body will be subject to ethics in public office and freedom of information legislation.
All the reasonable controls that one could expect for a body are being put in place. The heavy commitment and governance involved with the setting up of a quango do not arise. What I propose is a more flexible way of responding to the need. Given the list of controls, I believe the Deputy can be satisfied the new body will stick to its remit. Its representatives will be happy to appear before the committee, of which the Deputy is a member, to account for its stewardship. We are meeting the needs about which the Deputy has rightly raised concern.
I move amendment No. 4:
In page 9, between lines 8 and 9, to insert the following:
"(4) The chairperson and board of directors of the subsidiary will be appointed by the Minister.".
Roughly the same points apply in this regard. On Committee Stage, the point was made well that the regulatory impact analysis indicated the chairman of the Social Finance Foundation subsidiary would be appointed by the Minister; this will not be the case. There is no need for me to dwell on it any longer.
The vehicle we chose to establish is one that seeks to lean on the established experience of Social Finance Foundation. It was designed to be in operation in conjunction with the scheme as quickly as possible using the established experienced network. Social Finance Foundation has constituted an established network and had been channelling money to First Step Microfinance. It has experience in this space. The new body is being established as a subsidiary, which minimises costs and maximises the assembled experience.
The appointment is to be by Social Finance Foundation, which sets up the subsidiary. De facto, it is controlled by the Minister for Jobs, Enterprise and Innovation, subject to the agreement of the Minister for Public Expenditure and Reform. It is intended the members of the board will have relevant experience in micro-finance, thus making the facility a success. It would be fully accountable in the way I described. We cannot accept the amendment but, because of the way in which the facility is being established, we are meeting all the Deputy's concerns.
I thank the Deputies, particularly Deputy Tóibín, who has been present for all Stages. I believe the initiative has cross-party support. It is filling a gap that other countries have filled long before us. The Deputy, to be fair to him, has been advocating this measure for a considerable period. It was considered many times but we have succeeded in getting it across the line. I thank all my officials who have helped and I thank the other Departments who have co-operated in getting the legislation to this point. I certainly hope it will be a success. I assure Deputy Peadar Tóibin and Deputy O'Dea that we will make the body accountable to the committee so we can draw on the experience of Deputies at local level to ensure this will work as we hope.
We welcome the initiative and the work of the Government on this facility. We probably differ on two issues, the first of which is the ambition of the project, bearing in mind that we understand the Government is under financial pressure and that it seeks to protect the taxpayer, as we do, from exposure.
Given the 14.9% unemployment rate, the number of businesses that collapse everyday, the number of start-ups that cannot even get off the ground - the stillborn start-ups, as it were - the many entrepreneurs who must continue their activities outside of this jurisdiction and the nearly 200,000 people who are long-term unemployed, the Government needs to be more ambitious in its investments, in making credit and grant funding available to businesses and in the programmes and job activation processes that it offers to businesses.
We welcome this initiative. As the Minister stated several times, the efforts made to date have not been successful. In the round, this initiative is positive. The EU presents the State with many opportunities. We are a pro-European party and it is important that Ireland take full advantage of funds, for example, the European Globalisation Adjustment Fund, EGF, and the European progress microfinance facility.
I thank the Minister and welcome the Bill's passage. I also welcome the fact that the Minister has given additional weighting to young entrepreneurs who seek financing from the committee for their projects. I am delighted that he has taken this consideration on board.