Deirdre Clune (Fine Gael)

I welcome the Minister of State. I also welcome the Bill which paves the way for the introduction of the microfinance loan scheme. The legislation is an important plank in Government policy and I know it is close to the Minister of State's heart. I am delighted that he has been given the opportunity to introduce the Bill in this House. As he indicated, the legislation will, I hope, be enacted before the recess and the Department will then have the opportunity to implement the scheme.

The new microfinance loan scheme is aimed at small and medium enterprises that employ fewer than ten people. This is a very important sector of the economy and the enterprises within it are the backbone of small and large towns. If one drives from Dublin to Sligo, one will pass through many towns and villages in which one will find a host of small and medium enterprises run by individuals, families, etc. They are not creating substantial wealth for themselves but are providing employment and services in their community. They are trading in the community. As the Minister stated, they are the bedrock of our economy.

It has been identified that in a number of cases these individuals cannot access finance. I know it is important that before they look for a loan from this fund, they will have approached the banks and have been refused. We all know of such cases. We know of people with small businesses who cannot get funds from the banks to buy stock coming up to Christmas. That makes zero sense in terms of doing business. I hope the provisions of this Bill, when enacted, will enable them to access funds. This is one of a suite of measures being introduced by the Government in the jobs action plan. The introduction of the credit guarantee scheme is another important measure that acknowledges that banks are not facilitating all businesses. These Government supports will educate the banks by providing information as to how businesses operate. We know the banks were reliant on property, a sector they could understand, but now they need to come to grips with other types of business and understand the business environment.

The microenterprise loan fund will provide low levels of funding which will be important to many individuals. The Credit Review Office produced its eighth quarterly report in April. It was heartening for many enterprise operators that Mr. Trethowan observed that banks are largely supportive of medium- and low-risk new lending proposals from well-established SMEs - I stress the term "well-established" - that already bank with them. However, he expressed his extreme disappointment that there was no evidence of support for enterprise risk-taking on new and increased lending in the banks. His statement was stronger than his previous statements and gives support to what we are now discussing. It also gives support to the concerns of SMEs and many of us who are concerned about the operation of the banks. Mr. Trethowan acknowledged that the challenge for the banks is to develop approaches that can provide credit for small and medium-sized enterprises. He stated that over the past three months the Credit Review Office had received 44 applications from SMEs that had been refused credit by AIB or Bank of Ireland. Work is ongoing on 31 cases but of the cases completed in the first quarter, 17 refusals were overturned, resulting in the two banks' releasing €2 million of credit, supporting 140 jobs in the SME sector. That is significant. He said also that since April 2010, which is just over two years ago, 197 appeals had been received. Of the cases completed, 69 of these refusals were overturned, resulting in the banks' supplying €6.9 million of credit, which supported 683 jobs. The other side of bank lending is that when individual SMEs are refused credit, it diminishes the potential for job creation, which is a very important factor.

Mr. Trethowan issues a quarterly report, which is very welcome and gives us an insight into the difficulties that individuals experience when seeking funding from the banks. I very much appreciate the work he is doing, which offers support to businesses. There is a constant appeal to businesses to prepare themselves. In his speech the Minister stated that those applying for microenterprise funding will be supported in making their loan applications by the local country enterprise boards, soon to become part of the local enterprise office. That is important. We hear that many small businesses are refused credit because they do not have a proper business plan in place and their scrappy applications do not stand up. With a little support, that obstacle can be overcome. The Governor of the Central Bank supported the finding of Mr. Trethowan. It was found that in the Twenty-six Counties, compared to other countries in the eurozone, businesses were between 15% and 18% more likely to have a request for credit rejected by the banks. There is a difficulty in obtaining credit, which must be overcome. We need to work with the banks rather than take a stand-off approach. This is an important Bill because it focuses on individuals who employ fewer than ten people. These small enterprises were left at the wayside during the Celtic tiger era, but they are the bedrock of the community.

I welcome the announcement of the arrival in Ireland of the Silicon Valley Bank, which will support businesses in the fields of technology, life science, clean technology and private equity. SMEs in these fields have had difficulty in getting funding from our traditional banks. Silicon Valley Bank understands such businesses. This is a very welcome development. The Minister has encouraged the arrival of a bank that focuses on a particular type of industry. This is another plank that will help small businesses in this area to move forward. This Bill is a very important step and I welcome it.