Joan Burton (Dublin West, Labour)
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Question 110: To ask the Tánaiste and Minister for Enterprise, Trade and Employment her views on introducing a working capital loan guarantee programme for viable small and medium enterprises with funding problems; her views on both of these models; and if she will make a statement on the matter. [18955/09]

Mary Coughlan (Donegal South West, Fianna Fail)
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I have no plans to introduce a working capital loan guarantee programme for viable small and medium enterprises with funding problems.

However the Deputy will be aware of the establishment of the Enterprise Stabilisation Fund to be administered by Enterprise Ireland. Funding of €100m over two years has been made available to provide targeted support to indigenous viable but vulnerable indigenous exporting companies. Particular attention will be paid to small and medium sized enterprises engaged in exporting.

The restoration of stability to our financial sector will ensure that the financial institutions can actively contribute to our economic activity and particularly support our enterprise sector, including SMEs. Government initiatives in relation to supporting the banks have sought to ensure a central focus on business lending. The banks' Recapitalisation Package contains a range of initiatives that directly assist our enterprise sector in facilitating access to credit.

Under the Recapitalisation Scheme, Allied Irish Bank and Bank of Ireland have committed to measures to maintain a flow of credit to small businesses. They have committed to increase lending capacity to small to medium enterprises by 10%. A €100m environmental and clean energy innovation fund is also being established by each bank as well as a further €15m each to new or existing seed capital funds. Much of this funding will flow to small businesses.

SMEs are also covered by the Code of Conduct on Business Lending to SMEs. This Code which was published by the Financial Regulator came into effect from 13 March 2009. The Code lays down, inter alia, how applications for credit are to be handled, requires that each application is to be considered on its own merits, provides that collateral and personal guarantee requirements should not be unreasonable, sets out what is to happen when banks are declining or withdrawing credit, confirms what information is to be provided to customers and establishes a written complaints procedure for customers to follow when dealing with their bank. The application of the Code will promote fairness and transparency in the treatment of SMEs by the banks and should facilitate access to credit for sustainable and productive business propositions.

The recapitalised banks have agreed to pay for and co-operate with the carrying out of an Independent Review of Bank Lending to SMEs. Additional banks have now agreed to participate in this Review. The purpose of the review is to ascertain the position on credit availability to SMEs here and to recommend appropriate action to improve credit availability.

Allied Irish Bank, Bank of Ireland and Ulster Bank will also provide funding for SMEs on foot of €300m facilities provided by the European Investment Bank to assist developing SMEs.

The Recapitalisation package makes reference to a Clearing Group made up of representatives of government, banks, business interests and state agencies to identify patterns of events where the flow of credit to viable projects appears to be blocked and to seek to identify credit supply solutions. This group is being chaired by my Department and will work to provide a clear picture of any emerging lending patterns while facilitating direct discussion by all the relevant interests in addressing problems.

My colleague the Minister for Finance has responsibility for the banking system and I am in regular contact with him on the matter as are officials of both Departments. In addition I have met with the business representative bodies, the banks and the enterprise support agencies to ensure that all sides have a common understanding of the issues and a common commitment to support viable businesses. I will continue with these contacts.

Funding to the SME sector is also provided through my Department and the State Enterprise Support Agencies. The Department's continuous support for indigenous companies arises through maintaining a positive business environment and through particular interventions from State Agencies such as Enterprise Ireland, FÁS and the County and City Enterprise Boards. The allocations in my Department's Estimates for 2009 ensure that we continue to build on this strategy for the future.

SMEs are central to our economic development and the range of measures and supports in place will continue to help the sector adapt to the current economic climate.