The Deputy will be aware that both Microfinance Ireland, MFI, and the credit guarantee scheme began operating in October 2012. It is my intention that progress reports on the microenterprise loan fund will be published via the MFI website microfinanceireland.ie and updates on both schemes will be published on my Department’s website, enterprise.gov.ie, on a quarterly basis. Over 100 loan applications have been received by MFI, with 27 loans approved to date to the value of €427,000 supporting 68 jobs. MFI is currently actively promoting the availability of its loan fund and is focusing on a media campaign to raise awareness of the scheme across the country. Other options for promoting the fund are also being examined.
MFI was established as a private limited company with a board of directors. The directors have set the interest rate to be charged on loans under the scheme at 8.8%, taking into account a number of factors including prevailing market interest rates, the economic environment and specific risk factors.
The Deputy will know that lending to microenterprises is high risk due to the high failure rates with business start-ups, little or no track record, the fact that they were refused by banks previously, and no security available. Pricing of loans, therefore, tends to strike a balance between the support of new start-ups and the rapid erosion of the taxpayers' equity put into the scheme.
With regard to the credit guarantee scheme, there are currently 14 approved guaranteed loans resulting in €1.5 million of additional lending being provided to viable companies as of close of business on 15 February 2013. As a result of the sanctioned lending it is expected that there will be 113 new jobs created and 19 jobs will be maintained.
A premium rate of 2% is payable by the borrower. A rate of this nature had to be set to ensure the scheme complied with EU state aid rules and it was set at the lower end of the potential pricing spectrum, to which the Minister, Deputy Bruton, agreed.
In consideration of these categories, and recognising the current situation of the SME lending market in Ireland in the current economic conditions, it would be difficult to justify making the case for a premium rate any lower than 2% for a guarantee of this nature.
I will meet the board of Microfinance Ireland in the next two weeks on the microfinance fund. Also in the next two weeks I will meet representatives of Bank of Ireland, Ulster Bank and AIB who are managing the partial loan guarantee scheme for an update on that.