Brian Ó Domhnaill (Fianna Fail) | Oireachtas source

This is an important Bill which we, on this side of the House, will support. It brings about reform following the review of the credit guarantee scheme. These reforms are overdue, significant, warranted and absolutely necessary. The lifeblood of the economy not just in Ireland but across Europe is the SME sector. More than 99% of all the corporations in the EU are SMEs. I think the figure is approximately 99.8%. They provide more than 66.7% of all employment and account for 58.6% of value added according to EUROSTAT figures. They are essential.

SMEs have a distinct disadvantage in terms of accessing credit because they do not have access to credits through the markets, venture capital or the possibility of raising equity through the stock exchange. Therefore, often the only alternative available to them is bank lending. They have come up against huge obstacles over the past number of years since the economic crash as a result of the difficulty in accessing credit. This has been compounded by the financial crisis. It is not unique to Ireland but Ireland is one of the stressed countries, according to the European Central Bank and the Irish Central Bank, along with Italy, Greece, Portugal and Spain. The stressed position of the Irish economy has made it more difficult for SMEs to access credit and, as a result, less economic activity was generated within the State. The Government, therefore, had to intervene and the guarantee was introduced but it was found not to be working.

The review carried out in 2013, to which the Minister of State has referred, was scathing of the credit guarantee scheme introduced in 2012 and the figures on uptake speak for themselves. Various forms of guarantees have been implemented across European countries. Some are public guarantees while others are public-private guarantees. However, the litmus test must always be the uptake, that is, the numbers availing of the scheme. The figures up until the end of June on the current scheme showed just more than €31 million had been made available through it. The figures referred to today by the Minister of State indicate approximately €45 million in lending has been made available, which is an improvement, and I acknowledge that fact. It was going nowhere fast otherwise given it had a target of €450 million but lending was at approximately €1 million per month. Something drastic was required.

The review was damning. It found the scheme to be over-complicated, offered a narrow range of lending products and was skewing the risk in favour of the State. It also found the range of financial products under the scheme was too restrictive, that the three year term was too short given most loans are for a minimum term of five years to seven years and that the current level of the scheme guarantee at 7.5%, being 75% of 10%, was seen to be too low and did not provide an equitable level of risk sharing. More competitive rates must be introduced. For example, the recent Lord Mayor's fund in Dublin City Council, offered in conjunction with Ulster Bank, has a rate of in or about 4%. It is 4.1%, if memory serves me right. We have to look at making the scheme more competitive.

According to the review, the 2% premium was seen as expensive. There was no cost sharing of the premium with the lending institutions. Furthermore, the requirement to issue a formal decline letter as a prerequisite to being considered for inclusion under the scheme was viewed negatively by borrowers and stakeholders alike. The cost of administration of the scheme, which was high relative to the level of underlying scheme activity, came in for criticism. The review found the scheme was not appropriate for low-level credit needs and should be adapted to facilitate the flow of some credit, in particular to smaller SMEs, sole traders and partnerships. The scheme is onerous in terms of smaller levels of funding and, if we are to drive economic improvement within the economy, every sector must be catered for. The 2% premium was imposed on the borrower. There should have been some level of burden sharing of it with the bank, perhaps a 1% split.

The review recommended the appointment of a dedicated owner or manager to the scheme who would have responsibility for its general management, including the driving of performance against the scheme's objectives. Ultimately the scheme will be successful if it meets its performance objectives. Those objectives have been set out quite clearly. Heretofore, the scheme has not been meeting those objectives and some one is required to drive this forward. Public policy makers, including the Minister of State, cannot micro-manage a scheme such as this one but responsibility to drive the scheme has to be given at an appropriate level.

One alarming statistic was touched on by the Minister of State. I cannot understand why the scheme does not like the north west and other regions in the country. Why is so much of the activity generated in the direction of the commuter belt and the greater Dublin region? I will use the Minister of State's figures when looking at the uptake. I had alternative ones but the Minister of State's figures are worse than those which I was going to present this evening in respect of my area. Take, for example, the west. One of the big arguments coming from rural Ireland at the moment concerns the lack of economic activity there. The issues being raised include emigration, no opportunities, lack of investment, no jobs, no access to finance and banks not being available. Given the figures, I am not sure an economic appraisal was carried out in the review or if the Minister of State's Department has carried out a subsequent appraisal on why the uptake is so low. What are the reasons? I swill not speculate. Let us take the region of the west of Ireland, Galway, Mayo, Cavan, Louth, Monaghan, Donegal, Sligo and Leitrim. All of that region is the old BMW region which was recognised by the European Union as an area that required special economic incentive from the State and the European project. The region only received about 6% of funding so the remaining 94% goes to the rest of the country. There is something seriously wrong with such an allocation of funding. Has that been investigated? Why did it happen? Surely if we are bringing legislation forward and trying to drive this agenda then these are some of the questions that must be asked. Surely a manager driving performance targets would have to look at the situation as well. If the Government's programme is really about balanced regional development, creating regions and developing regions then a balanced approach must be at its core.

I am almost out of time. We will have an opportunity to tease out some of these issues on Committee and Report Stages. I am not sure how much time will be allowed but my party will table a number of amendments on Committee Stage. I would appreciate if the Minister of State would comment on some of the points that I have made.