David Cullinane (Sinn Fein) | Oireachtas source

I welcome the Minister of State to the House. The Oireachtas Joint Committee on Jobs, Enterprise and Innovation has spoken on this issue a couple of times so I am familiar with a lot of the background work on the matter. In fact, my party raised some concerns about this scheme when it was first established. We warned that it was not going to achieve its targets and, unfortunately, it has not. One of the big failures of the Government has been its inability to create a functioning credit market.

The dysfunctional credit market has played a significant role in the problems affecting small businesses. Legacy debt is still in place. Businesses are frozen out of growth and development because they are unable to service their loans or grow beyond servicing their loans. We have this dysfunctional system because the Government decided to have a very concentrated and limited banking market. If we had a more diverse and less concentrated banking market there is no doubt in my mind that it would create more competition and many of the problems regarding credit and access to finance would start to dissipate.

As the Minister of State is aware, the economy is very lopsided in the sense that we have few decent sized indigenous businesses that are able to export. Of approximately 4,500 exporters in the State, 1,500 are foreign enterprises, which means only 3,000 indigenous enterprises are exporting their goods. These figures do not compare well with other countries of similar size, such as Austria and Denmark. This structural problem in the enterprise sector can be attributed in part to the structural problems in the banks.

The credit guarantee scheme was designed to provide much needed finance to job creating small and medium-sized enterprises that are struggling to obtain credit from banks. This was one of the legacy issues that arose from the previous Government and the problem was inherited by the current Government. One of the promises that this Government made to businesses and people, in terms of developing and diversifying the economy, was that it would deal with the lack of credit available to entrepreneurs, risk takers and people who want to establish new businesses. However, most of the schemes that were put in place by the Government have failed or been insufficient.

The purpose of this scheme was to provide credit to viable businesses in two specific circumstances, where a business has insufficient collateral or where it operates in a sector with which the banks are not familiar. In such circumstances, the State would provide a 75% guarantee against losses of qualifying loans. The scheme was intended to benefit 5,400 businesses and create 3,900 new jobs but neither objective has been realised. These were not our targets in Opposition. These were the targets that were set by the Government. Since 2012, approximately €20 million backed by the guarantee has been provided to only 156 businesses.

Since the introduction of the credit guarantee scheme, Sinn Féin has repeatedly highlighted other opportunities for resolving the crisis small businesses are experiencing in accessing bank credit. My party colleague, Deputy Tóibín, has developed a model for a public banking system which could be used to direct credit to small businesses. It was modelled on a network of local banks in Germany which are a major component of the German banking system. It would add a new dimension in terms of competitive behaviour among the banks and rebalance somewhat the relationship between the banking sector and those it is meant to serve.

Our proposal envisaged the establishment of ten new regional banks, managed independently and supported by a centralised specialised unit that would provide auditing, risk management and procurement services to the network. The costs of these elements of banking would be reduced because they would be carried out centrally. Each bank would operate in a defined region, ensuring a balanced distribution of deposits and lending across the State and providing a greater incentive to invest in the sustainable development of a local banking region. In other words, it would focus money back into the regions because it would be ring-fenced.It would also ensure that the management, staff and expertise of the bank was oriented to the needs of the region.

The Minister will know that I published an economic development strategy for the south east in 2012. One of the key issues that arose in many of the engagements I had with small businesses and entrepreneurs was access to credit. Another key issue was how to get finance into regions. We all know that unless the capital, tools, resources and infrastructure are there, regions are not in a position to build, grow and develop to the extent they should. That is where the State comes into its own. It can provide a positive robust environment in which we can create jobs, encourage job creation, sustain jobs and reward and enable risk takers, entrepreneurs and those who are creative to create the jobs we need. Access to credit is central to that.

The Government will present its own case on the economy, which is recovering. I acknowledge it inherited a real mess from the previous Government. However, we are concerned here with the supports that have or have not been put in place for small businesses. Unfortunately, the Government has not succeeded in supporting the SME sector and small businesses across the State.