Nicky McFadden (Fine Gael)

I welcome the Minister of State and I appreciate that he is taking this matter. This issue is important from the point of view of the current economic climate. The concept of microcredit and micro-finance may not be too familiar to people in this country, but it was widely used during the 19th century in pre-Famine Ireland. In the extraordinary economic times we now face, we must open our current economic model to scrutiny. We must also suggest innovative ways of helping impoverished people to make a sustainable living.

The idea of micro-credit took hold in 1976, when Muhammad Yunus loaned $27 of his own money to a group of poor craftspeople in Bangladesh - mostly women who were trying to make bamboo furniture. They organised their own business and some 97% of the loans were provided to those women. All the loans were paid back. The idea is that small loans are given to poor people who would not usually be considered for this or any type of loan. The money is used to set up businesses and provide capital. Although no collateral is provided for these loans, the potential borrowers group together and become co-guarantors for each other. Effectively, they rely on each other to pay back the loan. It has been proven that these people are extremely trustworthy and do repay the loans in Bangladesh. The loan is paid back and banks make a small profit on the interest. This is how craftspeople in Bangladesh have proven that this is a successful way of sustaining a small business. The underlying philosophy is that these loans allow people to depend on themselves and their families, rather than on the state and international investment.

For far too long we have depended on foreign direct investment, but we now need to start depending on ourselves as we are a resourceful people. The relevant labour market is made up mostly of self-employed and poor people in the developing world. If it has worked in Bangladesh, surely it can work for small businesses and poor people here. It is a business model that gained international recognition when the founder of the Grameen Microbank, Muhammad Yunus, won the Nobel Peace Prize in 2006. While the Yunus model has been most successful in the developing world, there is no reason why we cannot attempt to provide such a facility here. This economic model is worthy of our attention. The Minister of State has introduced innovative ideas and is one of the most resourceful Ministers we have, so I believe he would give this idea impetus if he were to back it.

There are many families on the breadline because their businesses have had to close for the want of a small amount of money. We are bailing out banks by investing huge amounts of money in them, yet they are refusing to give credit to small businesses. This is a problem in every town and village, and unless we find a credit solution to help small and medium enterprises, they will become unsustainable and unemployment will increase further.

The Yunus microcredit loans started as a small idea which has now harnessed widespread appeal. The closest we have in this country is the credit union movement. While credit unions are wonderful, they do not provide interest free loans. We could introduce the Yunus model in conjunction with the Society of St. Vincent de Paul which is willing to endorse the idea. The Yunus model has proven its worth in the developing world. Commercial banks have not engaged in this sort of business, as they only provide loans over €25,000 for small and medium enterprises. It seems that such banks do not consider small loans worthwhile.

Over the years, hundreds of thousands of people used the old loan funds system, which was lending to as many as 20% of Irish households. These were monitored by a central regulatory authority. Funds in the system were successful in mitigating informational, moral hazard and enforcement problems. The funds thus operated at a surplus in a market where intermediation by the banks seems not to have been possible. Special legislation provided that their goal was to relieve poverty by providing credit to the industrious poor on a large scale and at competitive interest rates without public funding.

Evidence from the loan funds offers new insights into capital formation in the Irish economy of the 19th century. It suggests that traditional notions regarding the economic activities of the Irish poor may need to be rethought. I urge the Minister of State to examine the microcredit model. While I had read about this idea before, it was brought to my attention again by a Franciscan priest from my home area of Athlone. He compared it to St. Francis in that it aims to help the poor to help themselves. It is a good idea which concerns decent values, getting back in touch with our culture, and relying on one another. I ask the Minister of State to consider it.