Gerald Nash (Louth, Labour) | Oireachtas source

I am very pleased to be here this afternoon. This is the first opportunity I have had to address this august Chamber and I look forward to doing so. I also look forward to the engagement this afternoon and the development of our ongoing relationship.
I thank Members for the invitation to address the House on the important issues of SME access to finance and financing for growth. The Government has clearly identified SMEs as the lifeblood of the economy and recognises that they play a crucial role in economic and employment growth. The onset of the international financial crisis and the systemic problems within our national banking system, collectively combined with cultural payments issues, all conspired to create an extremely challenging environment for SMEs when it came to accessing finance and prompt payments, which have continued to be an issue for Irish business. Both pre and post-crisis, Irish SMEs are among the most reliant on banking finance in Europe. Consequently, Irish SMEs have been disproportionately exposed to the weaknesses in the banking sector relative to other European countries.
Increasingly one hears that, as the economy continues to recover and grow stronger, there will be a focus on financing for growth and a move away from securing finance to simply stay in business. The Government will continue to work across the economy, and through its Departments and agencies, to deliver appropriate programmes that work for the growing SME sector.
In my new job I have tried to consider the issues that affect access to finance and financing for growth in a practical way and I will now focus on some of the State supports that are available. First, communications and communication in general are essential. The Government recognises that the array of State funding options can be quite confusing and an SME may, in some cases, not know who to contact. In order to bring some clarity, a "supporting SMEs" online tool has been developed and is live on the local enterprise office website and on various other websites. The tool acts as a signpost, which is very easy to use, comprises eight short filter questions. SMEs are then signposted to some possible State resources and supports that they may be able to avail of. I ask Senators to test the tool because it really is useful, practical and straightforward.
Communication of the support environment for SMEs has also been enhanced by the establishment of the network of local enterprise offices, LEOs, that provide a first-stop-shop service for anyone seeking information and support on starting or growing a business in Ireland. The LEOs provide a basis for delivering an improved suite of services to start-ups and small businesses across the country.
In terms of accessing loans, LEOs are also available to assist microenterprises in applying for a Microfinance Ireland loan. It should be borne in mind that companies can get a lower interest rate by applying through their LEO than by applying directly to MFI. We have supported 333 micro enterprises with over €5 million worth of loans up to the end of September. That number is growing all the time. We have also put in place a credit guarantee scheme but its performance has been lower than anticipated. Nevertheless, we have supported 106 companies with over €14.5 million in guaranteed loans as at 14 November. We are working on the legislative process to amend the guarantee scheme to make it more effective in the SME lending market.
The Government is committed to ensuring there is a diversified funding market available to SMEs. We also understand that banks have and will continue to play a vital role in supporting SMEs. To this end, where a business has been refused credit by a bank, I would encourage it to lodge an internal appeal and, if necessary, contact the Government's Credit Review Office. Many solutions have been found for SMEs through these mechanisms.
Upskilling is very important. If an SME needs to upskill in the area of financial capability, my Department has funded the Finance4Growth programme which is offered by Skillnets through ManagementWorks. It means people can get access to an SME finance expert who will explain the different sources of finance available, guide them to those most relevant to their business, and advise on how banks, investors and agencies make decisions. It is a very practical option that is available to SME owners and managers. It is a free service with the option of a one day finance workshop and a further two hours of mentoring for a small fee.
As Members will be aware, the Government has recently established the Strategic Banking Corporation of Ireland. It is still in infancy but I have high hopes that it can be a market disrupter. I hope it will provide SMEs with access to new innovative financial products and a lower cost longer-term funding. I hope that the SBCI will encourage competition in the Irish banking system which is something that is really needed. Very shortly I will meet senior officials from the SBCI to make it very clear to them how I see its position on the landscape in terms of supporting SMEs in a practical way.
Unlike many European countries, Ireland did not have a state development institution to sustain funding to businesses throughout the financial crisis as banks reduced their lending exposure to small and medium-sized businesses. The persistent premium in the cost of finance available to Irish SMEs, compared with other European SMEs, puts our indigenous businesses at a competitive disadvantage. It results in the need for a local conduit vehicle to enable the channelling of low cost European finance into the Irish economy.
The SBCI will not just be part of Ireland's recovery but will be a permanent feature of the Irish funding landscape for many decades to come. The building of a recognisable brand and ongoing franchise will set this apart from previous discrete SME finance initiatives.

The Strategic Banking Corporation of Ireland, SBCI, will keep providers of finance focused on providing a good service to SMEs, first, by challenging them through the introduction of bespoke well publicised SME credit products and, second, by introducing competitive pressures into the marketplace because of the SBCI's explicit support for new market entrants.
The SBCI will provide loans that currently are not typically offered in Ireland like loans of longer duration and loans that have built in payment holidays that encourage and enable growth of our SMEs. The SBCI will use lending partners rather than direct lending for three reasons. First, using the operations of established lending partners, the SBCI can get its funding out to SMEs more quickly than by building a direct lending platform from scratch. Second, the SBCI has a mandate to increase the number of finance providers to SMEs and create competition; if it lends directly, it would hamper its ability to generate broader competition. Third, by keeping costs low, it will enable the lower funding costs to be passed on to SMEs. A core objective of the SBCI is to generate competition and choice for SMEs seeking finance in the Irish market. The SBCI will have a lower cost of funding and this cost benefit mustbe passed on to SMEs. That is a critical point.
The SBCI will aim to maximise Ireland's potential drawdown from multilateral and international supports such as European Investment Bank and European Investment Fund schemes. It will also work with other Government initiatives in this space and the Government has already decided, for example, that the revised credit guarantee scheme should be aligned with the SBCI. The SBCI is working with its first lending partners, AIB, Bank of Ireland and Bibby Financial Services, to provide initial funding to the SME sector by the end of 2014. A full roll-out will occur during January 2015 with traditional bank lenders and, importantly, with new credit providers from beyond the traditional banking sector. All of this will allow for the distribution of SBCI funding to the SME sector in Ireland on a prudent and sustainable basis.
In terms of what the State is doing for equity investment, my Department through Enterprise Ireland and the Irish Strategic Investment Fund, ISIF, which is due to take over from the National Pensions Reserve Fund, will continue to invest in a range of SMEs in Ireland. Legislation has been passed to transition the NPRF into the Irish Strategic Investment Fund,which will operate as a sovereign development fund with the capacity to make €6.8 billion of resources available for investment on a commercial basis to support economic activity and employment in Ireland. The Government's message in regard to the ISIF is that its door is open to proposals from the SME business community to develop a portfolio of SME finance investments. The SBCI and the ISIF will operate as enabling institutions, working with public and private actors to both augment the impact of existing initiatives and, where appropriate, to develop new measures.
Regarding our primary focus for 2015, given the progress that has been achieved to date, I believe that the emphasis should be less on developing new supply side measures and rather more on supporting and influencing the effective implementation of the major policy initiatives the Government has already introduced to support the SME sector and in regard to prompt payments. In 2012, the ESRI undertook a major research programme on the issue of SME financing and the final report from this considerable body of work, entitled Financing SMEs in Recovery, was published in October 2014. The Senators may have read about that because it was widely covered in the media. Significantly, the suite of policy recommendations contained in this report focused strongly on the need to enhance and embed the existing range of policy measures already in place.
We need to concentrate on how to maximise the potential benefits for SMEs of the evolving financial architecture that now exists in Ireland. In particular, there must be a concerted focus on ensuring that the extensive suite of initiatives now in place facilitate the availability of appropriate, diverse and sustainable funding options across the life cycle of an SME, not just at the start. Key policy areas for 2015 will include the roll out of the SBCI; the export finance strategy; co-operation with the European Investment Bank and other national promotional banks; equity financing; communication; Government sponsored initiatives; data infrastructure; capacity building; alternative financing instruments; and EU financing.
I am fortunate to have been given the opportunity of late to serve as a Minister of State at Cabinet at what I see as a hugely exciting time for Ireland and for the Irish business community. I am most pleased that this Ministry will see me working with businesses which essentially are at the centre of Ireland's recovery. We must not forget that SMEs directly employ 70% of our entire workforce. We are very good in this country at promoting Ireland as a destination for foreign direct investment, but SMEs are the lifeblood of our economy and our society and are our key employment generator.
I have made a commitment across the landscape that as Minister of State with responsibility for business and employment I will be as vigorous supporting small and medium enterprises in this country as we are as a nation at supporting foreign direct investment because that is critical. SMEs are present across our country in every town, village and city and if we are to have the type of balanced economic recovery we need, we must ensure that we have proper finance for growth packages for sustainable businesses across this country into the future. We have a job to do in terms of communicating the range of opportunities that are available to companies across the country.
I look forward to continuing to work with the Senators to ensure we can promote the opportunities that are available to businesses in the communities we represent across the country.