Caít Keane (Fine Gael)

I join Senator White in commending the Minister of State on the work he has done to date. I welcome this Bill for providing a targeted temporary partial credit guarantee scheme aimed specifically at small and medium enterprises. The Bill also identifies SME sectors which have insufficient collateral for traditional loan arrangements and which operate in areas with which the banks are not familiar. We are all aware of the need for credit among small businesses and the Bill is one of a number of initiatives the Government has introduced in the context of the action plan for jobs. The action plan outlined improvements that would support job creating enterprises and sought to support small indigenous companies and potential entrepreneurs, identify the obstacles that were in their way and find ways for the State to facilitate their job creation potential.

SMEs are the life blood for this country. We hear a lot about multinationals but SMEs operate in every town and village the length and breadth of this country. They form the majority of businesses across the State, whether in manufacturing, services or support to foreign direct investment. Growth in the SME sector will lift this country from the difficulties it is experiencing at present and contribute to the much needed growth targets that are required to get the economy back on track. We cannot focus solely on multinationals because we must also realise the benefits offered by small and medium indigenous enterprises. The biggest obstacle that small businesses face is the lack of access to credit. The introduction of the scheme outlined in this Bill will contribute to alleviating the pressures on viable businesses which have potential for growth and job creation but face difficulties in gaining credit.

The two main reasons for credit refusal are a lack of collateral and the shortage of expertise in the banking sector. As Senator White noted, our banks have become too soft and risk averse. I commend the Senator for establishing a small business at a time when it was not fashionable to do so. The banks have become too dependent on what were once guaranteed returns from property. It was too easy for the banks during the property bubble and they neglected the opportunity to develop expertise and an understanding of their customers' needs in terms of developing new business models and products. This issue is particularly important for new and expanding companies engaged in sectors such as technology. Banks should develop the competency to evaluate growth potential in new technology companies. The banks lack understanding of the market opportunities available to these companies. If a company's accounts do not show X euro in credit at a particular time, the bank is not skilled in assessing its potential.

The credit guarantee can support these businesses and help the banks in their learning process by encouraging them to understand the businesses to which they lend. The State will provide a 75% guarantee to banks against qualifying loans. Initially, the scheme will facilitate €150 million. Senator White sought a revaluation of that, which is provided for in the scheme. If it is working well, growing and has potential, perhaps the Minister will decide to expand it.

It is important to support business and I welcome the safeguard introduced by the Minister. When the State is guaranteeing something, it is important to insert safeguards. Section 9 of the Bill provides for the intervention of the Minister to withdraw the guarantee scheme if the lender fails or refuses to comply with the terms of the scheme. The Bill provides for a review of the scheme. The Bill provides for a three-year partial credit guarantee scheme. It is important for the small business sector for each of these years. It is important that lending takes place in addition to, rather than instead of, normal day to day practice. Senator White also referred to this, whereby the banks give with one hand and take back with another. I ask the Minister of State to keep an eye on this so that credit guarantee schemes currently in place are not hidden by the back door and replaced by this. He should ensure this is additional money.

The cost of lending during the three year lifetime of the Bill will be €19 million. This will be money well spent. The size and nature of the guarantee involved and the sums of money to be loaned are dwarfed by some of the guarantee facilities available in other EU countries. Reference is often made to our 12.5% corporation tax rate but, for example, Italy's largest public guarantee fund guaranteed €4.6 billion worth of loans in the first six years of operation. Many OECD countries have similar programmes. For example, the guarantee in the Netherlands is up to 50%, with up to 75% available for start-ups and innovative companies; Belgium and the United Kingdom offer 75%, the same guarantee provided for in the Bill; and in Germany up to 80% is guaranteed, with the average between 50% and 80%. It is worth noting that the Bill provides a guarantee for a duration of three years, as opposed to the lifetime of the loan. Any time our corporation tax rate is mentioned, we can say that other countries have initiatives to ensure businesses are attracted to their countries. This is somewhat shorter than those on offer elsewhere. In the Netherlands the guarantee is for a maximum of six years, or 12 years if real estate is involved. We know where real estate is going in this country. In Denmark and Belgium, the guarantee is for up to ten years and in Germany it is up to 15 years.

These important provisions will ensure that a close eye is kept on this scheme. Ireland is not alone in being the only country across Europe to introduce such schemes. The UK, Germany and Italy all have various experiences and it is important that Ireland has such a scheme as it will be of benefit to Irish SMEs competing against others that have such support. In the absence of credit flowing into small businesses, this economy will not recover, as has been acknowledged time and time again. It is important to ensure viable businesses that have a credible business plan and can get much needed credit. It is encouraging to know the Irish Banking Federation's response to the publication of this Bill suggests it is fully committed to its application in supporting the SME sector. The Bill has also been supported by Chambers Ireland, the Irish Small and Medium Enterprises Association, and the Institute of Certified Public Accountants in Ireland. They all acknowledge the Bill as a necessary part of facilitating small and medium enterprises in providing a much needed credit line.

Of the 1.8 million people working in the Irish economy, more than 900,000 are working in the SME sector. The SME sector is a significant contributor. I tried to research the number of women in SMEs but I could not find figures. The Irish Women in Business network came to the House last week. In March 2011, the EU Commissioner Viviane Reding, called for a pledge on women on boards, women in business and entrepreneurial women. She asked for companies to come to a voluntary agreement that, by 2015, 30% of board members will be women and 40% by 2020. I would like to see Ireland going down that route. We should also ensure banks facilitate women entrepreneurs. Quotas are important but I do not like them and neither does Ireland. I went for them in politics but I would not like to have to go for them in business. Norway has a quota for women in business resulting in 42% of board members being women. We must consider this.