Thursday, 16 October 2014
Ceisteanna - Questions - Priority Questions
I cannot believe we are still talking about the issue of credit, given that we are three and a half years into the life of this Administration. One in four SMEs is in arrears for more than 90 days. The total loan balance in arrears is at 41%, which is a colossal break on the development of the economy and people's lives. Despite the contortions of the Government in the past few years, we have only seen a very modest improvement in recent times. There is a necessity for the Government to make credit flow. To do this, it needs to solve the problem of businesses in debt distress.
As I stated previously, the Government has made more than €2 billion in financial supports available to Irish SMEs to support growth and job creation in the economy. Through the seed and venture capital scheme 2013 to 2018, the microenterprise loan fund and the renewed credit guarantee scheme, we are making more than €1.6 billion available in the coming years to SMEs through both credit facilities and direct investments. In addition, the Government, through the National Pension Reserve Fund, made €850 million available from 2013 through its three SME funds. It introduced the credit guarantee scheme and the microenterprise loan fund in 2012 which have now been operating for two years, as discussed with Deputy Dara Calleary. The next progress reports, to 30 September 2014, will be published shortly. As of 30 June, the credit guarantee scheme had 93 live facilities, resulting in €12.2 million being sanctioned through the scheme. Microfinance Ireland had approved 258 applications, to the value of €4.11 million.
In regard to other new sources of funding for SMEs, the seed and venture capital funds invested €75 million in 2013. The development capital funds have commenced investments and it is anticipated that they will invest €62.5 million this year. Later this year the Strategic Bank Corporation of Ireland will commence offering new credit lines to SMEs. Banks remain a core source of funding for SMEs. The latest figures show that new lending to small business is growing and that the rate of bank refusals is falling.
Credit will continue to be an issue, but as the economy improves, we envisage that the Government will increasingly see our strong companies attracting credit. There will continue to be a very strong focus on ensuring access to finance across the spectrum is available to SMEs. We will not be able to rely so much on banks and will have to have these alternative sources to sustain our continued recovery.
One can make hundreds of billion of euro available to the economy, but unless it is accessible to businesses, in practice, it will not find its way into the bloodstream of the economy. I refer to the ISME credit survey carried out in September. The figure for delays in making bank decisions on applications was at 21%. Some 18% of initial bank decisions were made within one week, which marked a deterioration. On average, the time taken to make an initial decision had increased to just over six weeks. Some 35% of respondents had had increases in bank charges imposed on them, while 21% had suffered increased interest rates. Reductions in overdrafts had been demanded of 21% of businesses, while some 69% stated the Government was having either a negative or no impact on SME lending. Some 40% knew about the microfinance scheme, down from 44% in the previous quarter. As I said, it is about accessibility as well as availability. We need to ensure credit gets into the bloodstream of society.
I will make two points. Across the schemes €150 million in new facilities has been put in place by my Department alone under the Government's initiatives. This is very significant. New finance from the banking sector is only at €2 billion. We are making a significant impact in that we now have the Strategic Bank Corportation of Ireland and the SME funds from the National Pension Reserve Fund. Therefore, we have two other sources being rolled out.
Those who are refused loans should appeal to the Credit Review Office and seek an appeal by the bank because in 70% of cases in which decisions are questioned these decisions are reversed either by the bank or the Credit Review Office. The Credit Review Office is a really important tool to support the SMEs that are having the bad experiences about which the Deputy spoke. It is an ally which should be used more. As only 3% of all those refused challenge the decisions, 97% walk away.
We need these refusals to be challenged. We also need to promote the new sources of finance we now have. They will be enhanced significantly this year.
There is a massive disconnect between the size of the problem, the ambition of the Government and the delivery of the Government. The Government's delivery is nowhere near its ambition, which in turn is nowhere near the actual problem itself. We heard a number of SME proposals in the budget. They are resuscitations of proposals the Government has previously made but are not working. The volume of loans guaranteed under the credit guarantee scheme is a fraction of the level the Government said it wanted to achieve. Some €15 million has been provided to 110 companies, which have created 870 jobs. It was initially supposed to be a €450 million scheme. The Minister suggested that the Government has provided €150 million, but this is just a fraction of what one scheme was meant to deliver. Just 186 companies have benefitted from the employment and investment incentive scheme. We still have not been able to find out how many jobs were created from this scheme in 2012. I am trying to urge the Government to get to grips with the exact size of the problems in society before matching its response to that size.
Our ambition is huge. I believe that during 2015 we will exceed our target of 100,000 additional people at work. The vast majority of those jobs will be created in small and medium-sized enterprises. We are also ambitious when it comes to driving access to finance as a means of resuscitating the growth of companies. This is the first Government to have put innovative funds in place right across the spectrum. Some €6.5 billion in funds - €4 billion from the bank and the €2.5 billion that is already in place - are available.
They are being rolled out as we speak. As I have indicated, over €150 million from my own few funds is going out the door. That compares with €2 billion in new lending from the whole banking system. These significant and ambitious changes are changing the landscape of choices that are available to SMEs as they grow. That is the environment we are now in. We are putting in place well-tailored instruments to help these businesses to grow. As the Deputy knows, the banking corporation is looking at export finance and at specialist instruments to ensure it is well aligned with the needs of companies.