John Perry (Sligo-North Leitrim, Fine Gael) | Oireachtas source

I thank Senator Higgins for raising the issue of lending to the farming community. The Government recognises that a strong agriculture sector is vital to our economy and plays a crucial role in employment growth.

A key priority is to ensure an adequate pool of credit is available to fund SMEs, including farms, in the real economy. It should be noted that the agriculture sector has recently shown increases in turnover, profitability and employment according to the Red C demand survey for the period April to September 2013 which was published earlier this week.

As I am sure the Senator is aware, ACC Bank will close all of its branches and business centres to the public and give up its banking licence next year. However, both AIB and Bank of Ireland are expected to lend to viable businesses, including farms. Both banks achieved their SME lending targets in 2011 and 2012. The Credit Review Office is available to assist businesses which have been refused credit and the upheld appeals have resulted in €18.5 million in credit being made available, protecting 1,521 jobs. This shows there is a strong prospect of success for SMEs going to the CRO and businesses refused credit are strongly encouraged to seek a review by the office. In recognition of the crucial role played by the CRO, in the recent budget the Minister for Finance increased the threshold at which SMEs can appeal refusals from €500,000 to €3 million. This will facilitate requests from a broader range of SMEs, as well as large requests for re-financing. It is vital that the banks continue to make credit available to support economic recovery. However, it is not in the interests of banks, businesses or the economy for finance to be provided unless the business is viable and has the capacity to meet the interest payments and repay the sums borrowed.

In June the Government announced its decision to establish the Ireland strategic investment fund which will absorb the National Pensions Reserve Fund and activate the NPRF's €6.4 billion of resources by making them available for investment on a commercial basis to support economic activity and employment in Ireland. The Minister for Finance anticipates the enabling legislation will be enacted early next year. Using the Ireland strategic investment fund, we will maximise our resources to enhance growth in the economy and improve key infrastructure to maintain Ireland's attractiveness as a place in which to do business and create employment. Already in the lifetime of the Government, the NPRF has established funds that support both strategic projects and a number that support SME financing that collectively involve commitments of €375 million. The role of a strategic investment bank over and above the contribution expected from the strategic investment fund will be informed by the requirements of the economy once the Government's key immediate objectives for the repair of the banking system have been completed.

The Taoiseach has indicated to the Dáil that he has held discussions with the German Chancellor, Angela Merkel, and they have agreed that work will be undertaken to find ways to reinforce Ireland's economic recovery by improving funding mechanisms for the real economy, including access to finance for Irish SMEs. The German Government has asked KfW, the German development bank, to work with German and Irish authorities to deliver on this initiative at the earliest possible date. Officials from the Department of Finance have already exchanged working papers on this subject with KfW and the German Ministry of Finance. Discussions with the German ministry have been held in Berlin and a meeting has also been held between Department of Finance officials and KfW personnel. We will be moving forward with this work with KfW and other key stakeholders in the coming weeks both here and abroad.

With support from Chancellor Merkel, the Government's intention is to ensure an effective and successful initiative emerges from the process. We will, therefore, be discussing any and all approaches that meet the strategic objectives of both states and ultimately facilitate lending to the real economy, in particular SMEs in Ireland. Although the precise form and delivery mechanism for any assistance has yet to be agreed, discussions with German colleagues will allow us to consider appropriate options for funding the recovery of the economy in the course of our work with KfW and the German Government.