I move: "That the Bill be now read a Second Time."
I am pleased to bring forward the Microenterprise Loan Fund (Amendment) Bill 2020. This is the first Bill introduced into this House by the new Government. It is important legislation and forms part of the Government's efforts to help our smaller enterprises meet the enormous challenge presented by Covid-19. The purpose of the Bill is to make certain amendments to the Microenterprise Loan Fund Act 2012, as amended, and the European Investment Fund Agreement Act 2018 to help businesses access additional finance.
Let me start by explaining why the Bill is necessary. As we all know, Covid-19 has had a devastating impact on our society and economy. Lives have been lost and livelihoods ruined. Our small and medium-sized enterprises have been dealt an enormous blow. Many have had to close their doors for months with revenues drying up overnight. As a result, hundreds of thousands of people are out of work and many people have seen their wages or hours reduced. Therefore, we must act now to avoid mass unemployment and a wave of insolvencies.
While the number of people on the pandemic unemployment payment is falling week-on-week, the scale of the crisis is unprecedented. Despite the challenges we have faced to date and those that are yet to come, with returning customers comes renewed hope for our small businesses and their staff. Like so many others, last week I enjoyed the simple pleasure of getting my hair cut and going out for a meal for the first time in four months. Getting small businesses like hairdressers, barbers, cafés, restaurants and gyms back open is not just vital for our economy, it is also important for the emotional well-being of our people.
Since I took up the role of Minister with responsibility for enterprise, trade and employment ten days ago, my focus has been on preparing the July stimulus package. As I said on the floor of this House last week, it will be radical of scale and speed. While no final decisions have been taken and the Cabinet sub-committee will meet for the first time next week, we are looking at a range of possible actions such as an enhanced restart grant to help businesses reopening, lower-cost long-term loans, reductions in some business taxes and extending the wage-subsidy scheme.
I have previously expressed my concern about the very high level of youth unemployment and the inequality that could emerge as a result between younger people and older people, those working in the public sector and big businesses and those in the private sector and small businesses. Poverty and deprivation rates have been falling in Ireland for more than five years. We are one of the few countries in which income inequality has reduced in recent years. We do not want it to go in reverse.
The July stimulus package will have a particular focus on sectors which employ large numbers of younger people, such as hospitality, retail, tourism and leisure and perhaps construction as well. Radical and immediate action is required if we want youth unemployment and unemployment generally to fall.
I would be happy to hear, as part of this debate, Members' ideas and proposals for the July stimulus package, or for the longer-term national economic plan that will be published alongside budget 2021 in October.
My Department and its agencies have worked hard since the arrival of Covid-19 to help businesses and employers overcome the challenge presented by the pandemic. The impact on small and medium-sized enterprises, SMEs, in particular, has been enormous. In many ways an economic pandemic followed the health pandemic. In May 2019, there were 238,000 SMEs in Ireland, employing more than 1.3 million people, out of a total workforce of 2.3 million. Groups representing the SMEs and microenterprises explained the need for assistance early in the crisis, with a particular focus on liquidity. This was backed up by research from the Central Bank, which indicated the likely need for some form of external liquidity for firms if they were to reopen once the Covid restrictions were eventually relaxed. My Department had already begun expanding existing schemes and developing new actions to help SMEs and microenterprises to access that crisis liquidity.
As part of the initial response, we reprioritised and repurposed existing programmes. This has included repurposing the Enterprise Ireland online retail, continuity voucher and financial planning grant schemes; the local enterprise offices' business continuity and trading online voucher schemes; InterTradeIreland's e-merge and emergency solution schemes; the credit guarantee scheme; the working loan capital scheme; and the microfinance loan scheme.
My Department has been focused on coming up with practical solutions to help businesses. For example, in addition to the existing credit guarantee scheme, a new Covid-19 credit guarantee scheme was developed using the flexibilities allowed by the European Commission. This allowed for credit guarantee schemes to include small mid-caps and primary producers as well as SMEs, but the temporary framework is due to expire on 31 December 2020, meaning that any loan guarantees, underwriting lending to enterprises from the financial institutions, must be in place by the end of the year in order to qualify. It is vital, therefore, that it is put in place as soon as possible to help as many businesses as possible in the timeframe available. Amending legislation is necessary and I look forward to returning to the House to talk about that very soon.
Today we are here to talk specifically about Microfinance Ireland and expanding its capacity to extend loans for microenterprises - businesses with nine or fewer employees - which cannot access bank finance. It has a high risk tolerance and provides essential funding to start-ups and other small businesses. Just under 80% of its loans were made to businesses outside of Dublin. Therefore, this Bill is also of real importance to rural Ireland.
The nature of Microfinance Ireland lending changed significantly with the onset of the Covid-19 crisis in March. In response to an urgent need for liquidity in the face of an unprecedented collapse in economic activity, my predecessor, the Minister, Deputy Humphreys, announced a €20 million Microfinance Ireland fund for affected microenterprises, which would make loans of up to €50,000 available, with reduced interest rates of 4.5% to 5.5% following a six-month interest-free period. Microfinance Ireland has experienced significant and growing demand since this loan was launched on 13 March 2020. As of 26 June, 581 loans have been approved amounting to a total of just under €16 million. I expect this demand will continue to accelerate as our economy reopens.
The proposed amendments to the Microenterprise Loan Fund provide a legislative basis for increased funding for Microfinance Ireland. This will ensure it can continue to lend to small businesses and help people get back to work. Given the exceptional circumstances that have ensued from the Covid-19 crisis, it is reasonable to increase the legislative ceilings so Microfinance Ireland can continue to fund very small businesses for as long as may be required. Given the urgency of this Bill, these increases have been included as amendments in the Bill as presented for publication.
The amendments to existing sections and the addition of one new section to the Microenterprise Loan Fund Act 2012 will make increased funding available to Microfinance Ireland, MFI, so it can continue to provide short-term credit facilities to businesses. In addition to increasing grant aid to Microfinance Ireland, the amendments will allow it to source efficient and affordable financing through the Strategic Banking Corporation of Ireland. The unprecedented nature of the shock caused by Covid-19 makes the need for these changes even more imperative, and even more time-critical. This is particularly important as our society and economy continue to reopen. The level of demand for funding from microenterprises has been so large that MFI had to pause its lending from the beginning of last week. Lending will resume when increased funding can be made available, once this Bill has been enacted.
The Bill also amends the European Investment Agreement Act 2018 to allow the Department to enter into new arrangements with the European Investment Bank, EIB, group to underpin financing schemes for SMEs and small mid-caps. The European Investment Fund Agreement Act 2018 allows relevant Ministers to enter into agreements with the European Investment Fund, which have a cumulative contribution committed up to a limit of €75 million. The amendment included in section 8 of this Bill will increase that limit to €500 million.
We want to be in a position to enter new agreements with the European Investment Fund for the benefit of small, medium and microenterprises. Increasing the Irish limit is necessary to allow expansion of schemes such as the €500 million future growth loan scheme which will provide for the longer-term lending needs of SMEs such as farmers and fishermen who are exiting emergency liquidity and want to reinvest in their businesses.
Given the significant demands on the resources of the EIB group, this funding may not be available to Ireland at a later date. Therefore, it is prudent to put this legislation in place to facilitate negotiations with the EIB group on this €500 million expansion of the future growth loan scheme as quickly as possible. Amendment of the European Investment Fund Act will enable Ireland to draw down further funding from the EIB. This would include schemes which facilitate business investment in climate action. Ireland is committed to the European Green Deal. As our economy begins to recover, we must take advantage of the opportunities presented by moving to a low-carbon future.
My predecessor, the Minister, Deputy Humphreys, was very active in her efforts to help businesses respond to the pandemic.
This included the urgent drafting of the Bill that we are considering today, the publication of which was approved by the outgoing Government on 29 May.
I am pleased to take this Bill through the Oireachtas so we can put in place the necessary measures for this vital cohort of the economy. In the past, SMEs in Ireland have proved themselves to be resilient, and their responses to this crisis have shown businesses are determined to adapt, revive and thrive. This Bill will help small businesses to bounce back, retain their staff and serve their communities. I hope that all of us across the House agree on the importance of the SME and microenterprise sector in Ireland and approve this Bill without delay.