The Convention Centre Dublin is a strange setting but this is an important discussion. I thank all the Deputies who made the journey across to this new Chamber to discuss this Bill today and those who spoke on it in Leinster House last night when the Tánaiste introduced it. There has been a good discussion, which has focused on many aspects of the supports needed for SMEs. I thank the Ceann Comhairle and Acting Chairmen for their efforts and all the Deputies who have participated in the debate.
I am glad to hear general support across the House for the SME sector generally and microenterprises in particular. I was pleased to hear the majority of Deputies acknowledge the need to ensure that microenterprises have access to suitable opportunities to facilitate reopening their businesses and re-emerging from the Covid-19 health crisis. I agree with most Deputies that SMEs and microenterprises are the lifeblood of many of our communities, towns, villages and high streets. They often give people their first job and many give those who are retiring a part-time job. They also support many others. They have had a presence in our towns and villages for many years, creating jobs and providing goods and services and business opportunities. Many have done their best to provide a service during the past four or five months. Those which were allowed to do so went to great efforts and I thank them and their staff. I thank in particular the retail sector for providing a service and ensuring that goods were available when needed. Apart from a few items such as flour, everything that was needed was available. The retail sector upped its game and built on much of the work it had been doing on supply chains and so on as it prepares for Brexit. It showed what it can do. Retail staff went to great lengths to turn up for work and took a risk in doing so, as did all the front-line medical staff whose efforts we regularly acknowledge. We must also recognise the work done by retail workers.
We are seeking to recognise that many of the business that stayed open and those that had to close need extra help and support to reopen, re-employ staff and grow their businesses again. We are very conscious of this and the whole Government is committed to providing such support, as is the whole Dáil. All parties are at one on this issue. As Deputy Gould noted, we are all agreed on the need to support SMEs and microenterprises and encourage job growth and retention.
The Department, under the previous Minister, Deputy Humphreys, has been central to this debate for some months. It has been involved in creating jobs and sustaining growth for many years. It showed what it can do with the Action Plan for Jobs in 2012. I was lucky enough to have been a junior Minister in the Department at the time. I am now working with the Tánaiste and Minister for Business, Enterprise and Innovation, Deputy Varadkar, and the other Minister of State at the Department, Deputy Troy. We will work with our officials to deliver a cross-Government approach through the stimulus plan in July and to drive the economic recovery plan in October. The Department has an excellent team which is ready to work with all our State agencies and enterprise agencies.
An earlier speaker indicated that more than 135 agencies are working with and on behalf of the Department on job creation. They include local enterprise offices or LEOs, enterprise units in county councils, local authorities and more than 30 agencies, such as Enterprise Ireland, Science Foundation Ireland, IDA Ireland and Microfinance Ireland, which work on job creation every day. They are involved in helping business grow and expand.
Last night, one speaker pointed out that our first aim is to help businesses to survive and get through this period. Thereafter, it is to help them build on that, thrive, grow and expand, and avail of the many opportunities to which Deputies referred. We have come through very difficult times and businesses in Carlow, which Deputy Murnane O'Connor mentioned, and elsewhere are under a great deal of pressure. There are great opportunities. The retail sector is part of my brief and many speakers noted that a large amount of business is now done online, although 70% of that is based outside Ireland. Irish retail companies can dive into that market and win more market share by providing a better service with online choice. They must also provide a friendly, local service because Irish people want to buy Irish where they can. The issue is to compete on cost, which is something on which we can work with businesses. There are many opportunities to win more market share. Plenty of Irish companies are selling their goods and services all over the world and we want to encourage more companies to do so.
Enterprise Ireland does a lot of work with larger companies which have potential to grow but many other companies which are not Enterprise Ireland clients could trade internationally through other schemes we are offering.
There is loads of potential and opportunity but we are going through a very difficult time. Those businesses need the help of our various Departments to get through this. We will get through it. Part of our work is to restore confidence. Many Members asked if many businesses have the energy and confidence to continue to put more money into their business and whether or not to borrow or re-employ their staff. This is a big decision on a weekly basis and we have to work with them to give them the confidence to do that.
We have been through this before as a country. We were back there in 2011 and 2012 when we tried to drive that recovery. Massive unemployment hit here in 2008, 2009 2010, 2011 and 2012. In 2012, 2013, 2014 and 2015 we came out of that through businesses getting stuck in. The self-employed sector put their shoulder to the wheel and took that risk and the opportunity to invest again in their business. It takes guts to do that and we need to support them in doing that but I am quite confident that with the right supports we can get this right as well.
Referring back to this Bill, it is not the only thing that we need to do. There are other measures already in place to support SMEs. The key here is getting access to funding which is a big issue for many companies, certainly microenterprises, be they start-ups, existing businesses or businesses trying to reopen. It is about access to that finance at the right time, in a speedy manner and at the right price. The previous Government had already put in place new and expanded schemes to address Covid-19. The new Government is hitting the ground running to do the same, starting with this Bill and the credit guarantee scheme which the Tánaiste and I and the Minister of State, Deputy Troy, hope to bring before the Houses before the summer recess.
I was also happy to hear a range of ideas from across the House on other schemes which we can examine with a view to including them either in the July stimulus plan or the economic package planned in October. The Tánaiste in his opening speech asked contributors, while commenting on this Bill, to put forward their own ideas to feed into this July stimulus. I hope to engage with all of the spokespersons of the different parties to get their ideas over the next week or two to put that plan together. All of the three Ministers in our Department have been reaching out to the various sectors to get their own ideas and views. I am conscious that the July stimulus plan will not be just be from our own Department but will be from all other Departments whereby we can make interventions to try to encourage recovery, to save and recreate jobs and to give everyone a little bit of a boost and build on that later on in the year as well. We are open to looking at everything that we can possibly do.
Not all of these ideas may be workable. Many ideas were put forward here today, some are workable, some are not and some may take more funding than we have available. Some may also take longer to put in motion but we will take all ideas and we are naturally willing to work with all of those over the years ahead. My officials and others have taken note of all of the contributions over the last few days and we are looking at these and will contact individuals if I do not get a chance to refer back to them today.
Microfinance Ireland is a not-for-profit lender which was established in 2012 under the Microenterprise Loan Fund Act. It has been providing business loans of up to €25,000 for up to five years to enterprises employing up to nine full-time equivalents. Many Members during the debate asked us to go beyond nine and that is something that I would have called for myself in the past. It is not possible to do this under European legislation but there are many other supports for companies with over ten staff. This is targeted particularly for those with up to nine staff.
Deputies also asked about the different types of businesses that might avail of this. It is accessible to nearly all types of businesses. The application process is quite straightforward and can be completed in most cases in less than six days. The sector does try to respond as quickly as it possibly can with a good service. I want to stress the point about the lender being not-for-profit - Deputy Mattie McGrath contributed last night and asked about different parts of this and that it is quite popular in Tipperary and other counties. The question was asked about cost and in particular interest costs. To be clear, Microfinance Ireland does not make profit on charging interest costs. It tries to cover all of its costs, but it is loaning into a high-risk category which is traditionally what it does, to start-ups and companies which are unable to get finance elsewhere generally or where the banks, for whatever reason, do not want to loan to them. This category is generally high cost and high interest. In the past, Microfinance Ireland has managed to loan money at between 7% and 8%. Already through changes made by the Minister, Deputy Humphreys, earlier this year in response to Covid-19 that interest rate has been reduced to 4.5% in most cases if through a LEO, or 5.5% if the loan is made directly through MFI. We have already responded to the interest rate call and would like to do more. I am willing to discuss this with Deputy O’Reilly to see how we can agree on this. I am aware that an amendment has been put down. We cannot put targeted interest cost into primary legislation or a time line for a deferral of payments for 12 months. This is something that we can look at in the regulations and in the scheme as we produce it. I will discuss it and work with the Deputy on this. This cannot be done by way of amendment to primary legislation, which is not where it belongs. We can see if we can reduce the cost of the interest rates and the terms as well. We have made the first six months interest free which effectively means that the interest rate is 3% over a three-year loan as opposed to 4.5%. Very often loans like this could have a charge between 10% and 15% on the open market. This is already quite a subvented percentage rate. We will look at and work with the Deputy on this. To be clear, nobody is making profit in charging 4% or 5%. People are saying that the money is coming from Europe at a much lower interest rate and what is the difference. It is not profit, it is the risk involved. The taxpayer subsidises that risk and that is what we do when we put our funding of over €100 million into this.
On the amount of money loaned, it can be up to €50,000. The average loan in the past was approximately €25,000.
Many Deputies referred to the application process being long and difficult. It should not be. Deputy Murnane O’Connor mentioned that and I am very happy to discuss that with her as the loan is very open to all sectors. It is quite straightforward. There is lot of hand-holding and coaching with the application process by MFI and our LEOs, because that is what we want to do in trying to help people who might not be familiar with drawing down big loans which might be new to them. Certainly, for a microenterprise or a start-up there is much engagement and a number of efforts are made to get the forms right. Sectors should not feel it is difficult or they are left out and I will be happy to discuss this also with the Deputy. We try to accommodate as well as we possibly can.
A number of contributors have referred to the approval rates of 40% to 50%. It is much higher than that if one looks at the applications over the last number of months as it is at about 80%. That is something that we try to encourage. We have asked MFI to be aware that businesses need supports now, to allow for that and to take greater risks. One of the first questions I would have asked is around the success of MFI. On the failure rate in terms of loans being repaid, often 50% to 60% of these loans may not be in a position to be repaid as there is quite an amount of losses associated with this kind of risk-based lending. It is important that we allow for that. That means that we are taking a chance on businesses and giving start-ups an opportunity.
When I first got involved in politics I was involved in enterprise boards close to 20 years ago and I would have been unhappy if there was not a reasonably high failure rate. If the failure rate is too low and it is all success, this means that we are taking no chances. If we are to encourage entrepreneurship, business growth and opportunity, we have to take a risk and to encourage all of our agencies to allow for that little bit of risk which will mean some losses and that some loans cannot be paid back. That may be because of market failure. Every effort is made to ensure a business is run right and can pay back debts. Sometimes with these loans one has to take a chance, let it go and see what happens, which is something we encourage. I will want to hear back from colleagues if there are hearing differently to this.
Many of our contributors last night, including Deputies Harkin, O’Reilly and MacSharry, raised the issue of the interest rates which I hope I have addressed. Deputy O’Reilly’s colleagues in Sinn Féin and many others support her amendment, which is worthy, and we would all like to do this and are calling for that lower interest rate. This is something that we will work on and look again at, bearing in mind that this is not-for-profit loan facility.
The operation of the loan schemes is through MFI and through the LEOs. Many contributors asked about various loans through the regular retail banks. This loan is not through these banks. The credit guarantee scheme is a different scenario which we will be debating next week and it is operated through the existing financial arms to help us to reach out to all parts of the community and give access for everybody.
Part of the conversation was also about getting the message out that MFI loans are available. We will certainly look at the communications to see if we can increase that because we do want to see these loans drawdown. When this scheme first started in 2012 and 2013, we did expect higher rates of drawdown but as the country recovered there was not such a demand for loans through Microfinance Ireland. That has been increasing over the last number of years and certainly over the last four or five months there has been and will be a much greater demand. We are responding to that. That is what this legislation is about, namely, is putting in place a mechanism which will enable businesses to borrow and drawdown more money to meet that demand. I ask Members not to judge MFI on its previous applications because these were made in different times. One will see many more applications coming through this year, which is what we are getting ready for. We will have to respond in many other ways also and that is what the July stimulus plan is about.
Many people raised issues outside of the microfinance loan such as rates. Deputy Andrews asked a question about Dublin City Council not being able to get clarity. There was absolute clarity on this. The Restart grant is based on last year’s rates which were paid in 2019 up to €10,000, with a minimum figure of €2,500. Most businesses which needed this have applied for it and are drawing it down. In some cases there may be a small delay in drawing it down but business knows it is going to get it.
Deputy Andrews raised the issue of the three-month waiver in respect of this year's grants. For clarity, the three-month waiver is available to everybody. Some of the local authorities are still working through applications for it because there are issues that remain to be sorted out related to the finance and the back payment to local authorities to cover that cost but it will be available. Some people might get a still get a bill but the three-month holiday is available to them. There have been many calls to extend the waiver and we will look into that as well in the context of the July stimulus.
With the permission of the Acting Chairman, Deputy Lahart, as we are ahead of time I would like to respond to some of the other issues that were raised. Many Deputies, including Deputy O'Reilly, raised the issue of the processing time for loans. The processing time is generally less than six days. I am sure there will be cases where processing has not been completed within that timeframe but we will keep the focus on this area. If Deputies are aware of any such cases, I am happy to hear from them in that regard. Generally, the processing time is less than six days. In fairness, feedback on some recent applications might be taking longer because technically the money had run out until such time as this legislation is passed. In some cases, the local authorities will not have had the funding to process applications. Following enactment of this Bill, assuming we have the support of the House today, we will move to get that funding in place as quickly as possible.
Deputy Catherine Murphy and others raised the issue of the approval rates for loans. The risk appetite has significantly increased and the approval of applications is approximately 80%, and rightly so in my view. I want to assure Deputy Dillon that officials are working with Microfinance Ireland, MFI, on approvals. As I said, the approval rate is approximately 80%. The Deputy also mentioned the need to communicate to people that this loan offering exists. We will work on that. Deputy Naughten spoke about using the partnerships and LEADER staff as vehicles to get the word out and to work with applicants. I am happy to do that. The local enterprise offices, LEOs, are already doing this work, although I know they are stretched in some cases in terms of staff numbers. We will use all channels available to us to get the message out and to work with companies who want to apply for this loan as well.
Deputy Ó Ríordáin expressed concerns about the three-year term of the MFI loans. I will take this into account when we are developing a new scheme under the Act, along with the interest rate and so on. There are other schemes in place, including the credit guarantee scheme and the future growth loan scheme, which have longer terms of six years and eight to ten years, respectively. In the past, the MFI loan worked quite well as a three-year term but we will re-examine it.
The issue of demand was also raised. Many Deputies mentioned they had received feedback from their constituents in regard to the demand for this scheme. Demand has increased tenfold over the past couple of months, which shows the pressures on businesses as reflected in the contributions of all of the speakers to this debate over the past two days. There is a demand for this loan. We will respond with this scheme and other schemes to meet that demand and to support businesses through this difficult time.
Many Deputies mentioned that the demand is for grants, not loans. We all would like to be able to provide grants to the various sectors but it does not work that way. There are grants available for particular sectors and more grants will be made available to support business as much as we can, but the taxpayer does not have an endless purse to fund everything. We are trying to stretch the purse as best we can and to combine our offerings and supports through grants, investment with equity, loans and so on. The microfinance loan and credit guarantee are other tools in the box to help business as well. We cannot always provide grants. The restart grant is not repayable and the rates waiver is not repayable. I have heard the message from Deputies that businesses want more grants and fewer loans. We get that and we will respond. Every business would respond in the same way. Most business sectors and their representative bodies understand that the State will not be able to address every issue by way of grants and that some assistance will be by way of repayable loans. How to make those loans more manageable is the issue. The amendment tabled by Deputy O'Reilly is about giving businesses more time to repay loans, lower interest rates and so on. We get that too, and as a Department we will work on that as well.
Deputy Pringle asked about the barriers to people drawing down this loan or other loans and if the interest is a deterrent in that regard. None of the research worked through by the Department, of which there is plenty, shows that the interest rate is the main deterrent or barrier to the drawdown of this or other loans. Rather, the application process, making a business case, access to coaching and mentoring to restart or expand a business are the main issues. While none of us want to repay loans at a high interest rate, the interest is not the biggest deterrent or barrier. As I said, accessing the funding is the issue and this is where we are focusing our efforts.
Deputies Michael Collins, Pa Daly, Michael and Danny Healy-Rae, Christopher O'Sullivan and others raised the issue of supports for the tourism sector. There is a big demand in this regard as well, to which we have yet to respond. There have been some interventions but no doubt more will come through in the July stimulus package. As a country we are reliant on the tourism sector, along with our SMEs. Deputy O'Sullivan spoke about supports for business in the fisheries and agriculture sectors. Many of the business supports being provided are provided in conjunction with other Departments. We will respond to those sectors. It is hoped we will be able to reach all of the sectors. The July stimulus plan and the October economic recovery plan for the next three years will have to respond sector by sector. We will have to examine each area individually to see what we can do to sustain businesses and to enable them to thrive and grow.
Deputy Ó Murchú spoke about businesses that were viable before Covid but might appear on paper to be unviable now. All of the supports provided down through the years have been directed to viable businesses that can survive, thrive and grow again. As a rule, we do not like putting money into businesses that have no chance of survival. That is a matter of judgment. We have to focus on businesses that in normal times would survive and will be able to survive now with a grant or a loan. This is where we will focus our efforts. If a business was viable up until February then we will work it to assist it to get up and running again. The country and our economy need businesses open. We need businesses employing people, creating jobs, paying taxes and enabling the movement of money through the system. It is those jobs and the finance derived from the various taxes that help to run this country. As has been repeatedly said for many years, a functioning economy is needed to fund all of the services we need to improve, be those in health, education or other sectors. We will work with every sector to try to make sure they are enabled to survive, reopen and re-employ their staff.
The online trading voucher scheme was mentioned by a number of Deputies. There is huge demand for it, and rightly so. We have to respond to that demand. The former Minister for Communications, Climate Action and Environment, Deputy Bruton, increased the funding available to all of the sectors in respect of this scheme. We probably need to do more because there is greater demand for it now. We will respond to that demand. It is a worthwhile voucher. I recall that in my earlier years in the Department with responsibility for business I spent a great deal of time trying to convince businesses to take up this voucher. We worked hard to push and sell it but there was no great demand for it. People have come to realise over recent months that this is what we need to do. We need to get as many businesses as possible trading online successfully. We will work hard to ensure that happens.
In addition to the online trading voucher scheme, we have provided an additional €6.5 million for the online retail scheme, which was originally to be a €2 million offering, but as there were a number of high-end successful applications, totalling 183, we responded by increasing the funding available to €6.5 million. We are trying to meet needs as they come forward.
There were references to credit unions and the banks.