Written answers

Wednesday, 19 January 2011

Department of Enterprise, Trade and Innovation

Credit Availability

9:00 pm

Photo of Catherine ByrneCatherine Byrne (Dublin South Central, Fine Gael)
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Question 82: To ask the Minister for Enterprise, Trade and Innovation his views on whether any initiative is needed from him to improve access to credit for small business; and if he will make a statement on the matter. [2558/11]

Photo of Batt O'KeeffeBatt O'Keeffe (Cork North West, Fianna Fail)
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I have ongoing contact with the main banks in relation to their lending to businesses and will, together with my colleague the Minister for Finance, and John Trethowan of the Credit Review Office, continue to ensure that they meet their lending commitments under the 2010 Recapitalisation package in terms of providing sufficient credit to the business sector. In this regard, John Trethowan recently indicated that the situation was much more positive for bank customers than it was six to nine months ago. As part of his Second Quarterly Report on SME Lending published on 18 November 2010, John Trethowan indicated that each of the banks have shown a positive attitude to the Credit Review Office appeals process, and the banks' Executives have been asked to ensure that this attitude is shared with their front-line staff.

My officials are also working with their colleagues in the Department of Finance, the Credit Review Office, Enterprise Ireland and Forfás to address access to credit issues for viable SMEs, including the option of a loan guarantee scheme to assist their working capital. It is important, however, that any new initiatives complement, rather than substitute, the main banks' lending commitments and activities under the 2010 recapitalisation package and that they would represent value for money from the taxpayer's perspective. Loan guarantees are just one of a range of possible measures being considered to address SME credit availability. Proposals for any new measures will have to be considered by Government in the first instance.

The National Recovery Plan 2011-2014 also sets out specific actions to spur further improvements in competitiveness across all sectors of the economy including measures to cut costs to business in energy, waste and transport, professional fees and property. The Plan also includes measures that will ensure that barriers to employment creation are removed.

There are specific actions which will benefit small businesses including, the review of the Business Expansion Scheme, the extension of the 15 day prompt payment rule to the wider public sector and the use of public property for incubator centres. In addition, capital investment for the Enterprise Development Agencies has been prioritised with €2.2 billion being allocated to support indigenous firms, win foreign direct investment and support research, development and innovation.

The Government has also over the last two years, introduced a number of initiatives to improve the availability of funding to the small business sector, including:

The commitment by AIB and Bank of Ireland under the 2010 Recapitalisation package of a further €20 million each for Seed Capital to be provided to Enterprise Ireland-supported ventures.

The Finance Act 2010 provided for the start-up company exemption to be extended into 2010 encouraging both entrepreneurship and economic activity.

The establishment of the Enterprise Stabilisation Fund to support viable but vulnerable exporting companies, experiencing difficulties because of the economic climate. This Fund supplies direct financial support to internationally trading enterprises by supporting their drive to reduce costs and through increased competitiveness, gain sales in overseas markets. To date, 242 projects have been approved funding of €86.2m to sustain over 10,000 jobs throughout Ireland.

The Government is also encouraging employers to create new jobs through reducing the costs associated with employment through the Employer Jobs (PRSI) Incentive Scheme. For each new eligible job, the scheme gives an 8%-10% saving on employment costs for the first year of employment. This will actively encourage the creation of new employment now when it is most needed.

All of these initiatives build on the existing range of supports and tax arrangements to encourage and sustain business activity. The services provided by the Enterprise Development Agencies are kept under review and will be adjusted to respond to the current economic situation. These Agencies continually review their activities in the light of international developments, national priorities and best practice.

Photo of Charles FlanaganCharles Flanagan (Laois-Offaly, Fine Gael)
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Question 83: To ask the Minister for Enterprise, Trade and Innovation if he will indicate if his Department has the authority to introduce the proposed loan guarantee scheme for the small and medium enterprises; and if he will make a statement on the matter. [2621/11]

Photo of Batt O'KeeffeBatt O'Keeffe (Cork North West, Fianna Fail)
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My officials are working with their colleagues in the Department of Finance, the Credit Review Office, Enterprise Ireland and Forfás to address access to credit issues for viable SMEs, including the option of a loan guarantee scheme to assist the working capital requirements of SMEs. The Working Group has received updated analysis from Forfás and Enterprise Ireland to allow greatest possible targeting of any initiative on viable, innovative and growth-orientated SMEs who face a specific market failure - namely where institutions have difficulty in applying existing credit policies and products. This can be, for example, due to lack of familiarity with certain sectors, markets and business models.

Substantial progress has been made in identifying the critical elements involved in any further initiatives. It would be important that any such initiatives would complement, rather than substitute, the main banks' lending commitments and activities under the 2010 recapitalisation package and that they would represent value for money from the taxpayer's perspective. The provision of credit to our enterprise sector, especially SME's, should primarily come from a properly functioning banking sector and any additional initiatives on the State's part should not relieve the banks of their obligations in this regard.

As indicated already, Loan Guarantees, are just one of a range of possible measures being considered to address SME credit availability. As part of the Government's strategy both AIB and Bank of Ireland have committed to lending €12billion for new or increased credit facilities to SMEs over two years. AIB and Bank of Ireland are also subject to the Credit Review process. All SME businesses that have had credit refused or withdrawn, can apply for an independent review of the bank's decision after the internal appeal. The Credit Review Office in its second quarterly report expresses its view that the recapitalisation strategy for the two banks is now achieving its objective of ensuring that a functioning banking system is in place to support economic activity. Proposals in relation to any new measures will have to be considered by Government in the first instance.

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