Lucinda Creighton (Dublin South East, Fine Gael)
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Question 1742: To ask the Minister for Enterprise, Trade and Innovation the progress he has made on a Government-back loan guarantee scheme for viable small businesses; the reason work on such a scheme did not begin when Ireland entered recession in September 2008; and when such a scheme will be available to small businesses. [33995/10]

Batt O'Keeffe (Cork North West, Fianna Fail)
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The provision of credit to our enterprise sector, especially to SMEs, should primarily come from a properly functioning banking sector. The whole focus of Government policy on banking since 2008 has been to return the banks to a position where they can access funds and lend these funds on to viable businesses and households to support enterprise growth and economic recovery.

Government has taken decisive actions in order to get credit flowing again to business. The Bank Guarantee Scheme, the 2009 Recapitalisation Scheme, the nationalisation of Anglo Irish Bank and the establishment of the National Assets Management Agency have all contributed to the stabilisation of the banking sector with a view to facilitating the flow of credit. The 2010 Recapitalisation package builds on the earlier initiatives and includes additional supports for enterprises, including SMEs. In particular, AIB and Bank of Ireland have both committed to making available not less than €3 billion each for new or increased credit facilities to SMEs in both 2010 and 2011. This must include funds for working capital for businesses.

Both banks have each published Lending Plans for 2010 and 2011 that include a sectoral and geographic breakdown of how they intend to divide up this new lending. Implementation of these Plans is being monitored by the Credit Review Office. While there has been some recent reported improvement in access to bank credit for small companies in June, July and August, I acknowledge that there is still a long way to go before the country gets back to so-called 'normal lending'. I am in regular contact with the main banks in relation to their lending to businesses and will, together with my colleague the Minister for Finance, continue to ensure that they meet their lending commitments.

In developing any further initiatives, it would be important that they would complement, rather than substitute, the main banks' lending commitments and activities under the recapitalisation package and also that there would be value for money from the taxpayer's perspective.

Loan guarantee schemes can be designed to address known credit market failures for viable firms, such as low collateral or lack of market knowledge on the part of the lender. My officials are working with their colleagues in the Department of Finance, the Credit Review Office, Enterprise Ireland and Forfas to address these issues for viable SMEs including the option of a loan guarantee scheme. Substantial progress has been made in identifying the critical elements involved in any further initiatives.