Dáil Éireann debate -
Tuesday, 9 Jun 1998

Vol. 492 No. 1

Written Answers. - Mutual Loan Guarantee Scheme.

John Gormley

Question:

39 Mr. Gormley asked the Tánaiste and Minister for Enterprise, Trade and Employment the research, if any, undertaken in recent years by her Department on the potential for the development of mutual guarantee schemes based on the widely applied European model of mutual guarantee schemes for small and start-up businesses; and if she will make a statement on the matter. [13687/98]

Tánaiste and Minister for Enterprise Trade and Employment (Ms Harney)

Arising out of the capital markets and long-term financing of developing Irish enterprise study carried out by Peter Bacon and Associates at the end of 1996, an evaluation of the merits of introducing, inter alia, a mutual loan guarantee scheme for SMEs was undertaken. This evaluation was conducted by officials from Forfás, Forbairt and my own Department during 1997 and included an analysis of mutual loan guarantee schemes in other European countries. The group found no discernible market appetite for a mutual guarantee scheme nor did it consider that there was sufficient evidence of failure in the SME credit market here as to justify the introduction of such a scheme. The evaluation did not rule out consideration of such a scheme, should a retrenchment in bank lending emerge in the future.

Earlier this month my Department appointed consultants to evaluate the need and scope for introducing new financial mechanisms for small businesses, including start-up businesses. This evaluation will include mutual guarantee schemes and the consultants have been specifically asked to consider other financial support measures that may exist in other EU countries and which it might be appropriate to introduce here.

Many improvements have taken place in the availability of capital for business in recent years. These include the small business expansion loan scheme, the access to finance scheme, a number of new venture capital funds through the current Operational Programme for Industrial Development and the launching by the Irish Stock Exchange of the developing companies market. Last week I announced details of the Enterprise 2000 Fund - a new joint venture initiative by Bank of Ireland Business Banking and Forbairt, making a £10 million seed capital fund available to young innovative companies, whose financing needs are not being met by existing venture capital or bank finance.