Seán Crowe (Dublin South West, Sinn Fein)
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Question 45: To ask the Minister for Jobs, Enterprise and Innovation the actions he has taken on the commitment in the programme for Government to ensure that an adequate pool of credit is available to fund small and medium-sized businesses; and his views on whether the creation of a loan guarantee scheme will be of benefit to small and medium businesses. [21148/11]

John Perry (Sligo-North Leitrim, Fine Gael)
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I refer the Deputy to my reply to Question No. 22 of today.

The availability of credit to viable businesses is a recurring challenge that has hampered new or expanding firms from developing new products and markets and thereby protecting or creating jobs. This is a challenge the Government is determined to address.

I, together with my Departmental officials, continue to work closely with our colleagues in the Department of Finance to ensure that the interests of businesses are central to Government actions in the banking sector.

The recently announced plans by my colleague, the Minister for Finance, to restructure and re-capitalise the banking system is the principal response to this challenge. These plans are designed to secure an adequate flow of credit into the economy to support economic recovery, even as the banking system is downsized.

As the Minister for Finance has confirmed, the banking system restructuring plan creates capacity for the two Pillar Banks, Bank of Ireland and AIB, to provide lending in excess of €30 billion in the next three years. SME and new mortgage lending for these banks is expected to be in the range of €16 billion to €20 billion over this period.

In each bank, a team of senior managers will be dedicated to the task of ensuring lending continues to grow to support economic growth. This lending capacity is incorporated into the banks' deleveraging plans which allow for repayment of Central Bank funding through asset run-off and disposals over the period to 2013.

Both pillar banks regularly provide the Department of Finance with monthly figures on balance sheet volumes, sanctioned facilities and geographic and industrial breakdowns of their SME lending and for sanctions and drawdowns by SMEs. The data is monitored to ensure that the banks are compliant with the terms of the Government recapitalisation as it relates to the provision of credit for SMEs.

As part of the Jobs Initiative and in accordance with the commitment in the Programme for Government, I am working towards the introduction of a targeted, Temporary Partial Credit Guarantee scheme which will be in operation later in the year. A call for competition for the design of a scheme was published on e-tenders on 15 June 2011, closing on 7 July. Arising from this process, formal tenders should be received early in August and on completion of the procurement process, contract commencement is envisaged to be the last week in August. The completion date for the scheme design is scheduled for early October.

The design of the scheme will draw from international experience to support new lending that would not otherwise have been extended by the banks. In this way, the scheme will be limited in its scope and will complement, rather than be a substitute for, existing lending activities by the main financial institutions. It will be a targeted scheme aimed at new companies or expanding companies trying to develop new products or markets that can demonstrate repayment capacity for the additional credit facilities but which cannot secure credit facilities, due to insufficient collateral or a lack of familiarity or understanding of the new industry, the new product or the potential of new markets. The amount of money that will be invested in this scheme and the criteria that will be applied are intrinsic elements of the scheme design, which is the subject of the current tendering process.

The Government's commitment will be for an initial period of one year. Specific performance criteria will be set down that allow for review and revision of the scheme at the end of that initial period before any commitment to a roll-over of the scheme for subsequent years. The temporary partial credit guarantee scheme will complement the Government plans on the restructuring and recapitalisation of the banking system which seek to secure an adequate flow of credit into the economy to support economic recovery.

Work is also underway within my Department on the establishment of a microfinance fund to provide loans of up to €25,000 to micro-enterprises employing up to 10 persons for start-ups and expansions. These initiatives are not to replace lending through the normal banking system but to provide additional lending where specific measures are warranted.

Businesses having difficulty with credit refusals can use the services of the Credit Review Office which will carry out an independent and impartial review of a bank's decision to refuse or reduce credit. With effect from 9 July, the limit for loan applications that can be reviewed by the Credit Review Office has been increased from €250,000 to €500,000.

As a further assistance to improving the cash flow of businesses, all Government bodies (excluding commercial semi state bodies) are now required from 1st July 2011, to pay suppliers within 15 days of receipt of a valid invoice. Given that the public sector enters contracts with suppliers worth €15bn each year, the importance of such a policy for all the companies that do business with the State is clear.

These actions already taken will enable businesses to access credit and benefit from growth in our economic activity. I am committed to the provision of an adequate supply of credit to viable businesses and I will continue to ensure that our heavily supported banking system plays its role in supporting our enterprise sector.