Rónán Mullen (Independent)

I welcome the Minister of State. The debate on the Bill is taking place in the context of CSO figures which show a continuing decline in the domestic economy and, thus far, the economy has contracted by 1.1% in the first three month of the year. The CSO has attributed the contraction to a drop in exports and personal consumption for the first quarter. This ongoing negative outlook with declining or flatline growth pushes down spending and consumer activity with the knock-on difficulties this presents for the small and medium enterprise sector.

The idea behind the scheme is not; microfinance provision has proved useful in various developing countries, where the poor cannot access credit from banks owing to the lack of collateral. The modern use of the expression "microfinancing" has roots in organisations such as Grameen Bank of Bangladesh in which the microfinance pioneer and Nobel Peace Prize winner Muhammad Yunus reintroduced the concept with much success. In Bangladesh one of the difficulties for small rural farmers and business co-operatives was that there was no banking infrastructure to serve their needs. We have a banking industry, one on which we have lavished large amounts of cash to keep it afloat. Despite the work of the Credit Review Office, it seems, however, that banks are not lending to businesses. Up and down the country I am sure the Minister of State has heard from struggling businesses that have been totally starved of access to credit. I have heard from business people who are completely exasperated as they meet a stone wall every time they try to deal with their bank. However, the problem is deeper than an inability to lend on the part of the banks; the real issue is that the banks have forgotten the business acumen to lend to enterprise. During the Celtic tiger era all they did was pump money in during a property boom, which was nice and simple. My fear is that they are now in uncharted territory when it comes to evaluating and lending to businesses, which is a skill they must relearn. In the absence of a functioning banking system which is scandalous considering the recapitalisation undertaken by the taxpayer, the State must step in with initiatives such as the microenterprise loan fund.

While I welcome the scheme, it ignores the underlying difficulties facing the SME sector, for which access to credit is a major issue. There are other issues which are equally pressing such as the cost of doing business and local authority rates, an issue I will discuss. Without a co-ordinated strategy to address all factors impacting on the SME sector, we will continue to have a moribund domestic economy. I do not want to be pessimistic or overly critical, however, as I welcome much of the good work the Department is doing. At €650 million, Enterprise Ireland's seed capital fund is the biggest managed seed fund anywhere in Europe. The Silicon Valley alliance, announced by the Minister for Finance during the week, is another fund of €100 million. I appreciate, therefore, that the Government is stepping forward to allow access to finance. The Minister, Deputy Richard Bruton, has pointed out that it is not standing back and allowing the problems of access to finance to fester. I also welcome his commitment in the Dáil that in every one of the schemes the Government will seek to have private sector money to complement what the State is able to provide, in addition to exploiting the European Investment Fund. I trust that this latest scheme will be advertised to the business people who actually need it. In many cases we hear about initiatives such as the Credit Review Office and then some time later learn that there has been a disappointing take-up by the sector targeted owing to lack of knowledge.

Having welcomed the scheme, I temper my remarks by adverting to the difficulties confronting businesses that are not addressed. The overall issue is that in an era of declining domestic demand we are pushing many SME businesses to export, which is obviously not an option for every business. We know that 55% of jobs in Ireland are created in the SME sector; we can contrast this figure with that in the United Kingdom where it is approximately 60% and Germany where it is approximately 70%. The focus of the Government is often on foreign direct investment. On that front IDA Ireland is a world leader, but we cannot have a functioning economy based on exports alone, in particular where most SME companies are geared towards supplying the domestic economy.

The famous Mittelstand companies in Germany were referred to by the Minister in the Dáil. It was an interesting reference, as German SME companies have traditionally enjoyed a strong banking sector and pro-business policies from the government. The backbone of German industry which has been such a success in recent years has been built with the assistance of a banking model that has been well suited to the smaller scale companies on which we need to focus. It allows companies to grow and export. We have not had such a system and lack the right policies in other areas.

Local authority rates for retailers continue to be a major issue. While there is a need to have a well funded local government system, as the Government pulls away central funding and councils still need to provide services, the burden will fall on ratepayers. We need to examine the rationalisation of local authorities in that context, with energy prices, transport and waste disposal. A debate on another day could focus on taxes and debt forgiveness where debt is unsustainable, as recommended by Moody's ratings agency earlier this week. Unless we see a more co-ordinated approach embracing reductions in costs for businesses, in addition to certainty on personal taxes and the issue of debt forgiveness, we will not see Irish people spending again any time soon. That is a critical issue.