Pearse Doherty (Donegal South West, Sinn Fein)
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40. To ask the Minister for Jobs, Enterprise and Innovation the impact of the high cost of credit on enterprises and job creation; and his views on the take up rates of Government created credit schemes as a percentage of the overall credit available under each scheme. [24444/13]

Richard Bruton (Dublin North Central, Fine Gael)
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As the Deputy is aware, all cost elements are critically important to the efficient running of a business and the level of employment. The cost of credit is just one of a number of very important cost factors for business and this Government takes this issue very seriously. SMEs are the engine room for jobs and growth in Ireland and the Action Plan for Jobs 2013 contains a specific section designed to deliver access to finance for this key group. This section and its actions are being driven by the SME State Bodies Group, chaired by the Department of Finance and on which my Department sits. The Group also supports the work of the Cabinet Committee on Mortgage Arrears and Credit Availability, which is chaired by the Taoiseach and which closely monitors developments in respect of finance for business.

In the context of addressing the needs of the key SME sector the Deputy will be aware, that I established 2 targeted initiatives to support an additional flow of credit into the economy by filling gaps where specific market failures in the supply of credit to SMEs exists, namely: the Microenterprise Loan Fund and the Credit Guarantee Scheme.

The Microenterprise Loan Fund Scheme opened for business on 1 October 2012, to provide support in the form of loans of up to €25,000. It was established to improve access to credit for entrepreneurs and microenterprises and to facilitate the growth and expansion of viable businesses from all industry sectors which have been refused access to credit by banks. To be eligible for a loan, persons must possess a business plan, must have a commercially viable proposal, must confirm that they have been refused credit from a bank, and must have the capacity to repay the loan. The potential viability of the business proposal will be the dominant factor in all credit decisions.

The Scheme is demand led and was designed to initially facilitate €40 million in additional lending over the first five years and would allow MFI to make loans to over 500 microenterprises, creating over 700 jobs.

A full progress report on the operation of the scheme from 1 October 2012 to 31 March 2013 can be found on my Department's website () and the Microfinance Ireland (MFI) website ( ). It is intended that the next progress report to end June 2013 will be published in July 2013, but I can advise the Deputy that since then, up to 6 May 2013 MFI had received 173 applications, of which 60 loans were approved (valued at €1,005,092 and supporting approximately 150 jobs), 82 applications declined, 17 withdrawn or appealed and 14 applications still work in progress. I am keeping all aspects of this Scheme under on-going assessment.

The second initiative is the Credit Guarantee Scheme (CGS), which began operating on 24 October 2012. As at 10 May 2013 thirty six (36) live CGS facilities have been put in place resulting in €3,661,100 being sanctioned through the scheme by participating lenders and it is expected that 190 new jobs will be created and 115 jobs maintained under these facilities. Quarterly progress reports are published on my Department's website (). The latest progress report detailing the analysis and performance of the CGS for the quarterly period ending end 31 March 2013 is now available on my Department's website.

The Credit Guarantee Scheme provides a 75% State guarantee to banks against losses on qualifying loans to firms with growth and job creation potential. Target groups are commercially viable SMEs, i.e. well performing companies that have a solid business plan and a defined market for their products or services, thereby demonstrating their ability to repay the loan, but that do not secure credit facilities due to the following two market failures:

1. Insufficient collateral for the additional facilities, or,

2. Growth/expansionary SMEs which due to their sectors, markets or business model are perceived as a higher risk under current credit risk evaluation practices.

To be eligible for the guarantee, the business must have applied for credit, and must have been refused for either of these two reasons. Ulster Bank, AIB and Bank of Ireland are participating in the Scheme.

The Scheme is designed to facilitate up to €150 million of additional lending to eligible SMEs per annum. The Scheme is demand led and the uptake may be lower than €150 million in any given year, depending on company needs. Take- up of the Scheme is being closely monitored by Capita, the Operator of the Scheme, and my Department. I committed to review the Scheme after 12 months of operation.