Pearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Jobs, Enterprise and Innovation his actions to date to ensure that the small and medium enterprise sector has access to credit. [51879/12]

Sandra McLellan (Cork East, Sinn Fein)
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To ask the Minister for Jobs, Enterprise and Innovation in view of the fact that the loan balance of the banking system in Ireland has been shrinking since the Government has come to power,his views on whether the credit provisions created by his Department are sufficient. [51886/12]

John Perry (Sligo-North Leitrim, Fine Gael)
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I propose to take Questions Nos. 7 and 21 together.

My Department has introduced two targeted initiatives to support an additional flow of credit into the economy by filling gaps where specific market failures exist – the credit guarantee scheme and the microfinance loan fund. The guarantee scheme has been live since 24 October and is expected to provide an additional €150 million in lending for small businesses per year over the next three years. Ulster Bank, AIB and Bank of Ireland are participating in the scheme. The guarantee scheme is intended to address market failure affecting commercially viable micro, small and medium-sized businesses in two specific situations, namely, where businesses have insufficient collateral and where businesses operate in sectors with which the banks are not familiar. It provides a 75% State guarantee to banks against losses on qualifying loans to firms with growth and job creation potential. For every €150 million of additional lending, the scheme is expected to benefit more than 1,800 businesses and create more than 1,300 jobs.

The second important initiative which we have developed and delivered upon this year is the €90 million microfinance loan fund to address access to credit and support lending to the most vulnerable cohort of our SME sector – the microenterprises. Microfinance Ireland opened for business on 1 October 2012 and is providing loans primarily to newly established and growing microenterprises across all industry sectors, with commercially viable proposals that do not meet the conventional risk criteria applied by banks.

Loans are for amounts up to €25,000 and will generally be provided for business start-up costs, expansion costs and working capital. The thrust of the lending policy will always be focused strongly on the potential sustainability of the business, its ability to repay the loan and the creation and maintenance of jobs. It is intended that the fund will provide loans to some 5,500 microenterprises over time and will, over a ten year period, generate close to 8,000 jobs at a cost of approximately €2,500 per job, which is very good value for the State’s investment.

My Department is keeping a close eye on developments in respect of both schemes as matters unfold to ensure their ongoing relevance and will adapt the parameters if, following review, it is deemed necessary. In addition, my Department is working closely with the Department of Finance and the Credit Review Office to evaluate evidence on credit availability and to ensure that the amount of credit flowing to the SME sector is maximised to facilitate sustainable job creation and retention.

Peadar Tóibín (Meath West, Sinn Fein)
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I welcome some of the changes the Government has introduced with regard to finance. The scale of the problem is that approximately €40 billion in private sector investment has come of the economy in recent years. The Government set up the credit guarantee scheme which cost it €6 million over three years. It is putting in €2 million on an annual basis through that scheme to try to solve the problem in the credit area and it is putting in roughly €2 million on an annual basis through the microfinance fund. Given that the State has the second worst credit environment in Europe, just behind Greece, and given the vast problem we have, this amounts to tinkering around the edges of it and it is not enough to deal with it.

The real elephant in the room is the banking industry, an industry most of which the Government owns at this stage. The fact that it has not been able to orient the banking industry to carry out its responsibility is a disgrace. The Credit Review Office has dealt with 150 or 200 applications in recent times and has overturned the decisions in 55% of the refused applications. That means that the office is dealing with a number of applications on an annual basis and is overturning the decision in 55% of them. That, by definition, determines that the system in place under the Minister's stewardship is malfunctioning.

John Perry (Sligo-North Leitrim, Fine Gael)
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On the level of funding, the Deputy has not been correctly advised because the Government is investing €50 million over three years.

Peadar Tóibín (Meath West, Sinn Fein)
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In the credit guarantee.

John Perry (Sligo-North Leitrim, Fine Gael)
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Yes. The loan guarantee is €450 million, the innovation funding is €200 million, there is also NPRF funding and €150 million is being put in from the innovation fund. Therefore, considerable funding is being provided. With regard to the difficulty in terms of opportunities for business, the microfinance fund is a good start-up fund. It was very successful in Dublin previously. People who were refused a loan were given a start-up loan under it and the fund will be operated from a centre of excellence in every county. Some €3.5 billion has been put into the two pillar banks. I have sought to simplify the application process within the banks. The obligation is on the applicant to appeal the decision if his or her loan application has been refused and to go to John Trethowan's office.

here is only so much we can do. We are benchmarking the banks on what they are doing. It is a matter for people to go through the application process and I went through some of them myself. If one's application is refused, one can appeal the decision within 21 days. The code of banking has been modified to ensure that applicants will get a reply within 21 days. If one's application is refused, one can go to the Credit Review Office.

It is very easy to come in here and say nothing is being done for small business. We can only encourage those in business to submit a business application, there is a due diligence examination of the application to assess the viability of the proposal. Banks will not give out money for projects on which they will not get their money back, and the Deputy knows that better than anybody. He has been on this case for some time making the same attack all the time, namely, that there are no funds available. The Government will put in the best part of €500 million, €700 million and €850 million in funding into small business during the next three years.

Peter Mathews (Dublin South, Fine Gael)
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I interrupt the Minister of State to advise that Deputy Wallace is waiting to ask a question.

Peadar Tóibín (Meath West, Sinn Fein)
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I would like to ask a supplementary question.

Dara Calleary (Mayo, Fianna Fail)
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I also want to ask a question.

Peadar Tóibín (Meath West, Sinn Fein)
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I would like the Minister of State to address an important question. The Credit Review Office has overturned the decision in 55% of the applications it has received. It, by definition, is saying that in the sample size of the applications with which it is dealing there is a breakdown in more than half of the applications with which the banks are dealing. I believe that the Minister and the Minister of State are powerless to act in this. I ask them to ask the Ministers on the Economic Management Council to allow them be members of it in order that they can try at least to bring an enterprise orientation to it.

Peter Mathews (Dublin South, Fine Gael)
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Deputy Tóibín, I have to be fair. I call Deputy Wallace to ask his question. The Minister of State might hold off answering until Deputy Wallace has asked his question.

Mick Wallace (Wexford, Independent)
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The Minister is probably aware that five months into his time in government President Hollande of France has fulfilled his election promise of setting up a strategic investment bank which is making €42 billion available to small and medium sized businesses. I asked the Taoiseach yesterday the position regarding our strategic bank and he said it was ongoing. When I said that nearly two years has passed he replied that it takes a while to do that. Does the Government intend to set up a strategic investment bank or has that idea been abandoned? The Ministers can say the banks are open all they like but I know many people in good, sustainable businesses who cannot get money. A strategic investment bank, as promised by the Government, would be a godsend.

Dara Calleary (Mayo, Fianna Fail)
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I understand the strategic investment bank is with the five point plan somewhere in the ether. The credit guarantee scheme is welcome. As the Minister of State said, it has been open since 24 October. Can he give any indication of the application level to date?

The microfinance scheme set up on 1 October is welcome. I asked about that because there appears to be no promotion of it. Those of us in the House know about it and the enterprise boards are talking about it but what is the position in terms of the wider public?

I ask the Minister of State to react to the figures given to the finance committee some weeks ago.

The Minister of State has been trumpeting the figure of €3.5 billion all day but three weeks ago at a meeting of the Joint Committee on Finance, Public Expenditure and Reform AIB admitted that only €600 million of this is new lending. What are the views of the Minister of State on changing the format of Credit Review Office reporting? It reports on money approved as opposed to money actually drawn down, and a very significant problem exists in the banking sector whereby a loan is approved but the hurdles to be faced when drawing it down are bigger than what one would see in the Grand National.

John Perry (Sligo-North Leitrim, Fine Gael)
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A review of the Credit Review Office is being undertaken and when we receive the report, we will examine our options for enhancing it. With regard to Deputy Tóibín's point on the 55% figure, I will not defend the banks because it is clear they must do better. The fact the Credit Review Office has overturned 55% of decisions shows how effective it has been.

Dara Calleary (Mayo, Fianna Fail)
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Nine hundred cases.

John Perry (Sligo-North Leitrim, Fine Gael)
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We are working with the banks. With regard to AIB and the €600 million for new lending, we must also take into account the fact that people are opting out of existing loans from other banks. With regard to Deputy Tóibín's point about Greece, the report in question was from the Central Bank which included all banks not giving money.

Dara Calleary (Mayo, Fianna Fail)
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The Central Bank.

John Perry (Sligo-North Leitrim, Fine Gael)
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The report included all banks. We must remember the main players for small and medium-sized enterprises are Bank of Ireland, AIB and Ulster Bank. The report included all banks, including those which do not fund small and medium-sized enterprises.

Deputy Wallace made a point on an investment bank. Years ago the ICC bank was very effective and had a niche market for business. The State practically owns one bank and is a major stakeholder in another and one must see them in operation first. The Taoiseach and the Minister, Deputy Bruton, are putting considerable pressure on the banks. We must remember that to make money banks need good small and medium-sized enterprises. How else will they make a profit for their shareholders? Last week, Bank of Ireland advertised enterprise week throughout the country. Perhaps the bank gave people ten reasons it could not give a loan, but it invited business people in to make loan applications and AIB is doing the same. We are taking the banks at their word that they are facilitating small and medium-sized enterprises. Banks want successful business people and we are clearly benchmarking the banks on this to ensure they support viable small companies in the micro sector. Enterprise Ireland's high potential start-up unit has an in-house bank adviser, and big companies have ways of obtaining money.

To respond to Deputy Calleary's point, retail services are under huge pressure at present. The easiest way to give a loan at present is to increase the overdraft of a business person by €50,000 because after two years, this overdraft will be a long-term loan. Business people may be sorry they obtained an overdraft because it becomes a long-term loan. In certain cases people are extending credit limits for suppliers and it is very difficult.