Microenterprise Loan Fund (Amendment) Bill 2020: Committee and Remaining Stages

Sections 1 to 6, inclusive, agreed to.

I move amendment No. 1:

In page 5, between lines 20 and 21, to insert the following:

“Amendment of section 10 of Act of 2012

7. Section 10 of the Act of 2012 is amended by the insertion of the following subsection after subsection (2)—

“(2A) Monies loaned to microenterprises in accordance with a scheme under this section shall—

(a) be loaned interest free with zero repayments for the first 12 months of the loan,

(b) cap interest rates on such loans at 2 per cent, with interest only being applied to cover the overheads of administering the scheme, and

(c) be limited to loans issued before 1 January 2022.”.”.

The liquidity, the supports and the access to credit lines that will assist microbusinesses and SMEs in the coming months are very necessary. There is no disagreement on that; everybody is saying the same thing. SMEs need supports, grants and zero-interest loans, and they need the Government to be as imaginative as the Executive in the North. Indeed, to set the bar low, they need it to be as imaginative as the Tory Government, if that is not too outrageous to suggest.

Let us not forget that the businesses in question were closed because of a public health emergency, not because they could not trade or were not trading successfully. They are not start-ups. While the Minister of State referred to start-ups, and obviously some of them at some point were start-ups, most of them are established, viable businesses that were forced to close, not because there were no customers or business but because of a public health emergency. These are unprecedented times and the response needs to be unprecedented.

The amendment, therefore, seeks to ensure that money can be lent to microenterprises, interest free and with zero repayments for the first 12 months of the loan, and the interest rates on the loans will be capped at 2%. That figure will not be a target or a percentage that will have to be hit, but rather a cap so businesses can use that money to get themselves back up and running. We have included a timeframe and are mindful that this is unprecedented. In Britain, a similar scheme provides for no repayments for the first 12 months. That is what we are asking the Government to consider and the amendment seeks to ensure that businesses will have that breathing space. If we look across the water, we can see that more than 1 million bounce-back loans, worth a total of £30.9 billion, have been released to microenterprises. That is the kind of ambitious plan that will be needed to ensure that SMEs can not only access credit but also get it easily without too many barriers in the way and know that they will not just be piling up debt.

The Minister of State indicated that nobody will be making a profit out of this, but the loans are administered by commercial banks using the rules relating to commercial banking. These are unprecedented circumstances, however, and some imagination needs to be applied to the matter. What businesses do not need is more debt or postponed debt, deferred debt or debt piling up while they are trying to get out from underneath this and while they try to restart.

I reiterate what I said to An Tánaiste last night. This cannot just be about jobs, any jobs, whatever types of jobs. It has to be about decent work and paying workers properly. There has to be a quid pro quo, not just for the Government but also for SMEs. I ask that the Minister of State consider the amendment and that he consider taking the actions that Sinn Féin has outlined. I welcome his commitment to meeting us. I note what he said about primary legislation and there may be some disagreement with us about that, although I do not want to be the one who interferes with all the agreements that have broken out here this afternoon. Clearly, we are all of the one mind and we want to ensure we get the finances to SMEs.

Sinn Féin seeks to ensure that in allowing businesses to access those credit lines, we do not subsequently put them under so much pressure that the credit is ineffective. I echo the calls made by my colleagues and other Deputies in respect of grants. Grants will be very necessary and have to be considered, although perhaps that is a discussion for another day. Nevertheless, I reiterate that these were viable businesses that were closed because of a public health emergency, not because they were not viable. They are the businesses we are seeking to ensure can get back on their feet and start to re-employ people, with a focus on decent jobs.

On my reference to start-ups, in general microfinance loans are available to start-ups. They were mentioned by other Deputies and I do not suggest that all the demand in recent months has been from start-ups. Of course it has not been; it has been from businesses that want to reopen, survive and thrive. The loan is also available to the many microenterprises. There will be people who, for whatever reason during these months because of Covid-19, might have to change job category or sector. The job they had for life might not exist because we do not know whether every sector will fully recover. It is important, therefore, that money is available to those people who might want to switch their efforts, move over and start a new company or microenterprise. That is what this money is for and it is important that in every debate on the matter, we get the message out that money is available to start-ups. Some high-risk start-ups might have no certainty of where their customer base will be and that will be another use for this money.

The Deputy has proposed an amendment that would provide for a longer interest-free period and lower interest rates. This is something that any sane person would naturally want to consider or achieve. That does not mean it will be possible but, certainly, when developing a new scheme under the Bill, we will consider it. I will honour that commitment to meeting the Deputy to discuss that because we are conscious of the support from all sides of the House for achieving lower interest rates and longer repayment breaks. We have responded to that by putting in place a lower interest rate. It was traditionally 7% or 8% but has now been cut to 4.5% There is a six-month break that did not always exist, meaning there is now an effective rate of 3%, which is quite manageable for most businesses.

Nevertheless, businesses need access to as much as they can get through these times. While we will work with the sector on that, we have been advised by the Office of the Attorney General that it would not be legally sound to legislate for the details of the scheme in primary legislation, which is the point I was trying to make earlier. It is a matter for secondary legislation and regulation as we bring the scheme forward in the weeks ahead. The Government will have to oppose the amendment because the Bill is not the place to make that provision, although I understand the intention, which is probably supported from all sides of the House. Given the strong cause of support for the amendment from many Deputies, I will certainly keep the Deputy's proposal in mind and engage with her on that when developing the new scheme under the Bill if it is passed by the Houses.

In case there is a little misunderstanding about this loan offering or tool, I reiterate that the loan in question is not administered through the banking sector. It is through Microfinance Ireland, as a non-profit bank. The Deputy referred again to the traditional banking sector but that does not apply in this case. The loans are not granted through banks that might make profits for other reasons. That is not what this is about. It is a not-for-profit bank. For this kind of money, I accept that many different applications are coming through from businesses that are quite sound and just need a little help, which is what we are trying to do, but traditionally the microfinance loan is about funding new start-ups that do not have a history to base their credit rating on or businesses that are finding it difficult to access money. It is generally a high-risk category associated with quite high losses, which the taxpayer funds. That is our job and we are happy to foster the opportunity to create jobs.

This kind of money is usually very expensive. In many sectors, this could be money with an interest rate of 14% or 15%, and we are making it available already at 4.5%. It was traditionally a 7% or 8% rate, reduced to 4.5% and effectively 3%, but we will re-examine that. To be fair to Microfinance Ireland, the loans are not for profit, even though there has been a perception from some contributors in the House in recent days that they are. I accept that other loan offerings and measures we offer are administered through the banks but this is not. That is why, in this case, it is not appropriate to put into primary legislation what the amendment seeks to provide for, but we will work with people on the matter in the weeks ahead.

I will support the amendment, although I accept the points the Minister of State made about where the details are decided. The greatest risk will be people not being able to go back to work. The cost of that includes unemployment payments. Then there are the secondary aspects of this, namely, the jobs that will be lost directly and the knock-on effects for suppliers, including the loss of more jobs.

Also to be considered are the ancillary costs of unemployment, not least the impact on the person training people, and the costs of medical cards and housing assistance payments. If even a portion of the jobs were to be saved by having an interest rate of 0% for a short duration, to give people a fighting chance to get back up and running, it would make very good economic sense. Those kinds of things have to be factored in when considering the interest rate. When the Minister of State talks about high risk, he should note the highest risk is that of not getting people back to work. The expensive money may well be even more expensive because we have to borrow it as a State, if we are running deficits, to increase the amount available to a cohort who would be unemployed, for example.

I hope the Minister of State will consider this fund in the round and not exclusively as a microfinance fund. I ask him to consider how many jobs the fund might save. Deputy O'Reilly made the point that those affected did not close their businesses and did not plan and could not have planned for what happened. Therefore, it is not a matter of examining how such a fund was handled in the past but of accounting for what is a unique situation. Counterparts across Europe have lower interest rates. We have the double whammy associated with the risk of a no-deal Brexit. Even if there is a deal, it will have an impact on the economy so there is a genuine argument for the fund to be seen as an investment.

I had hoped to contribute to the debate on Second Stage but, unfortunately, the arrangements were such that I was not able to get across from Leinster House to here.

We have to begin to understand why we are at this juncture and why this funding is necessary. It is necessary because, for nine years, the Fine Gael Government failed to understand the need for direct funding for businesses to support them after the financial crash. It ignored the fact that the main pillar banks completely blocked any attempt by microbusinesses to engage with them, obtain funding and restructure their loans in an effective and sustainable way. Essentially, the Fine Gael Government failed the indigenous business sector and, as a result, we must find some mechanism, this legislation being one, to put money into the sector to allow the businesses to obtain funds at a reasonable rate. I suggest a reasonable rate of 0%.

At the hearings of the Special Committee on Covid-19 Response, business representatives told us they had not been consulted in any meaningful way on the method to put the money required into the sector. For this reason, there is a misunderstanding in the Government regarding the extent of the problem we are dealing with. The extent of the problem can be summed up as follows. The banks literally screwed the SME sector and made it impossible for SMEs to conduct their business properly and efficiently over the past nine years. There was little or no Government intervention during that period. The SMEs were trying to restructure themselves financially after the crash and are still trying to do so. They were only coming to the point of managing their debt when they were struck by the Covid-19 pandemic and the closure of their businesses.

Therefore, we should not see funding at a rate of 4% as doing the businesses a favour. We should see this as the State's responsibility to rescue the sector, which is made up of small family businesses throughout the country. The businesses are keeping their communities alive. They have not got the surplus money to carry a burden of debt, even at a rate of 4%. I should not say all of them are in this category as some of them do have a surplus, but the majority are on their knees seeking direct support from the Government in the form of a grant or a rate of 0%. The criteria have to allow the small businesses to restructure their existing debt. There should be further funding, provided in a sustainable way, to guarantee the jobs the businesses fought so hard to create over the lifetime of a family or over generations. We cannot ignore the fact that many of these businesses will simply not be able to access the fund. Therefore, we must remove the red tape and bureaucracy and make it simple for them to get the funding to prove they can sustain the debt. The interest rate is a killer for small businesses and needs to be explored.

I draw the attention of the Minister of State to the fact that during the hearings of the Covid-19 committee, many of the sectors, represented by their national bodies, told us they were not asked for their views and had no input. They particularly wanted to have an input into the July stimulus. They have not got that opportunity. The representatives told the committee that specific interventions are needed on a sectoral basis. Without going into the detail of what each sector might want, I contend that the main issue for each sector was that it could not access funds. Even today, the banks are causing the same difficulties that they caused during and after the financial crash. Funds like the one in question, which are being made available by the Government, are essential to the sector. The rate is critical in terms of structuring and the criteria used for applications.

I will support everything to do with the SME sector but I have to take issue with the fact that we are not engaged fully enough with it to learn from the Government mistakes and for businesses to learn from their mistakes so we will not make the same mistakes over and over again. In the nine-year period, we should have learned a huge amount. I ask the Minister of State to review the criteria to enable the SME sector, especially the very small businesses, to gain access to the money. He should review the interest rates the Government is proposing to charge and reflect on the fact that while the banks may say, through their advertising, that they are open for business and supporting the SME sector, they are not. The evidence is the closure of many of the shops in the villages and towns throughout our constituencies. If the new Government is to represent change, the change would be to listen, learn and put the appropriate supports in place that will support each and every sector.

I am conscious that Deputy Catherine Murphy, who probably has to leave now, and Deputy McGuinness were not here for the whole debate. To reiterate, it is not that we are disagreeing with the need for businesses to have access to low-cost finance - that is what we are trying to achieve - but the microfinance loan is only one mechanism and does not comprise all the mechanisms.

Eight or nine years ago I supported the idea of a State-led recovery bank for small and medium enterprises and I championed the cause in committees. I was surprised a version of that in the microfinance loan, which was a small intervention of direct lending not through normal banks, did not see a higher demand. The application process indicated there was not much demand then, although there is a demand for the product now. That is why we are increasing the amounts that can be loaned and decreasing the rate charged. The demand was not there, so the Deputy is not technically correct in saying the previous Government got everything wrong. Access to finance did not continue to be the massive issue I thought it would be in the earlier years of that recession. Many still did not get the finance they needed and in some cases the banks did not facilitate success for everybody but there was a massive recovery in jobs, growth and the economy.

It is not true to say the previous two Governments failed in this respect. That is not to say they got everything perfect and there are still many areas of the country that had not recovered even before the onset of Covid-19. We will continue to work on that. It was not necessarily all down to access to finance. I would have agreed with the Deputy nine years ago that the State had to be involved with direct lending. We did so but the demand for it was lower than what I thought it would have been. That is probably because the credit guarantee scheme was very successful. We are expanding that as well and the legislation will be here next week or the week after. It is an important part of the process. This type of direct lending, the microfinance loan, is for a targeted market that is generally a high risk. I stressed during my contribution how the applications to this process have changed and there is evidence of very viable businesses applying that are just going through a difficult time. We are trying to respond to that as quickly as possible.

I have committed to looking at the interest rate and I do not see it as the barrier that the Deputy says it is. Access to funding is a major obstacle and that is why we want to get money to these businesses as quickly as possible. This is a not-for-profit organisation and we are not profiteering on the interest rate. It has come down from 8% to 4%, with a six-month moratorium. It is effectively a zero cost for six months and costs will naturally go up after this.

I have listened to the argument and we will focus on this as we put the scheme together in the weeks ahead. The State must, through its Departments, reach out to as many sectors as possible to sustain, grow and restart as many businesses and jobs as possible. This does not mean we can give grants to everybody but we must intervene where we can with grants, equity, access to loans and so on. We must use all the different tools in the box. We do not have a bottomless purse, as much as we wish we had, but we must use what we have in taxpayers' money. We will also borrow extensively to reach out to all the sectors we can to save those jobs. This is not to say the Government does not recognise the demand or need for grants. We know about it and we will try to respond as best we can.

The changes in this legislation include the availability of money at low interest and an easier application process. It is a streamlined process, although it is limited to €50,000. Businesses probably need more but there are other schemes for such cases. This is only one access point and there are also restart grants. Businesses have indicated to me that the most important tool in recent months has been the wage subsidy scheme and they want that to continue.

I take issue with Deputy McGuinness saying that businesses feel they have not been listened to. I accept that during the past three or four months of the emergency they may not have had enough time to be listened to properly, but I understand the previous Minister, Deputy Humphreys, engaged quite a lot with all the sectors during recent months to bring forward supports. Other Ministers did likewise. As the lead Minister in my Department, the Tánaiste has engaged over the past week and even before that with such issues. Both the Minister of State, Deputy Troy, and I are already sending messages to all sectors to come to us quickly with initial ideas for the July stimulus, which is not yet finished. We will take ideas from everybody who contributed in the Dáil yesterday and today. I would love to sit down with Deputy McGuinness to hear his ideas too. We will take all of them in and do what we can in this July stimulus. We will return around the time of the budget with the long-term economic recovery plan.

We will of course listen to all the sectors and representative bodies of businesses because they have many good ideas. It is our job as a Department to engage with such stakeholders, use those ideas and apply our imagination. We will not be limited in our imagination in trying to expand these schemes. Naturally, we will look abroad and take on board ideas for good schemes. We are very open to that.

I take issue with the comment that nobody is being listened to. We have a proven track record as a Department that we listen to everybody. The former Minister, Deputy Bruton, and I involved every stakeholder we could find in the country in the Action Plan for Jobs. They played a major role in what was a major jobs recovery. It can be done and it will be done again. This does not mean we got everything right but it certainly does not mean we got everything wrong.

I admit that I love to hear Members from Fianna Fáil referring to "the crash" as if it was something that just happened and over which they had absolutely no control. The two Deputies in the previous exchange are members of parties that were capable of agreeing the previous four budgets, so it is a bit rich for Deputy McGuinness to complain when both the parties were involved in the process. This will not help small and medium enterprises and they do not want to hear about it. They want to hear that the Minister understands the problem.

I take the point about start-ups but it is not helpful for the Minister of State to say microfinancing is normally very risky. This is not the same and we are not talking about a couple of young fellows with a dream. These are viable businesses that may have had to close because of a global pandemic. They want to reopen and get back on their feet. They are looking for a hand up and not a dig out. For this to happen there must be recognition that this is not microfinance in normal circumstances. These are unprecedented times and they require an unprecedented and imaginative response. There is not the same level of risk as there would be with a start-up. These are proven businesses and, essentially, they are asleep. They just need sustainable and affordable help from the State.

This amendment seeks to cap interest rates at 2%. As I stated, that is not a target but rather a cap. I welcome the Minister of State's offer to engage and I am more than happy to do that. It would be a useful exercise.

I echo the comments of Deputy McGuinness on small and medium enterprises and the belief they have not been listened to. As the Minister of State, Deputy English, has stated, it may be the case that we were in the middle of a global pandemic and perhaps there was not time for that to happen. Time is there now and these businesses must be absolutely central, as must be the representatives of workers, when the Government puts together its July stimulus. It must respond to the needs of businesses and workers. This recovery will not be built on the back of precarious employment and low wages. If there is to be a recovery at all, it must be built on decent jobs and work and fair terms and conditions of employment.

As I stated, the amendment seeks to cap interest rates at 2% and that is in no way outrageous. The Minister of State has said nobody is trying to seek to profit from this but we must absolutely factor in that this is not microfinance in the normal run of things. This is not microfinance for start-ups but for viable businesses, and that must be reflected in the response and the interest rates in particular.

I thank Deputy O'Reilly for her comments. The advice of the Attorney General is that this is not the place to put such an amendment to primary legislation. That is why we are not supporting it. It is not that we do not support the goal of an interest rate that everybody can manage in accessing funding. This is what the loan process looks to achieve.

It often happens in a debate that people take out one word from a contribution. I referred to "risk" and, to be fair, the Deputy knows what I meant. She is being a little bit smart in trying to change the course of the debate. I refer to the overall cost of the scheme, and when I say it is not for profit, I mean it is not for profit. There is no profit to be made here. Generally, finance of this nature to clients taken on by Microfinance Ireland in the past would have been of high risk, although not in all cases. There is quite a high level of loans that are not repaid, and the taxpayer subsidises them. That is part of our job to give companies a chance to restart. We are prepared to do the same again and put the money in. That does not mean I am saying all the applicants are a high risk, and it is unfair to refer to my comments like that. I am being realistic in referring to the cost of a fund like this.

This type of loan will absolutely continue to be available to start-ups as there will be more of them in future. In 2011, 2012 and 2013, we pumped much money into such start-ups because it was part of the process of creating more jobs. Some people will not be able to get back to the jobs they had and we must get behind them. We must give them a new opportunity, and that is what this fund is for. In the next couple of months it will be for the companies that want to borrow money at low cost to restart or go again. That is what it is for and it is the reason we are making changes. There has been a massive demand and applications have increased tenfold. We want to respond to it.

I should be clear that is only one process.

There are many other interventions from our Department across Government. This is one of them. We will be here every week in the weeks ahead with new schemes, new inventions and new imagination to push out the taxpayer response to help business to grow jobs because all of us want to do that. We all agree on that but this amendment does not belong in primary legislation. That is the argument I am trying to make.

I hear what the Minister of State is saying. I may not necessarily agree with him but I do not have access to the advice of the Attorney General and, going on previous form, it will not be shared directly with us. I believe the Minister of State understands what I am saying. I was not the one who referred to risky businesses, high interest rates or start-ups. That was the Minister of State. I was only quoting the words he used. It is not that I was bringing up that; I was not. I was talking about viable businesses that need a hand. Sin é.

On the basis of the Minister of State's commitment to engage with us, I will not press this amendment. My office will be in contact with the Minister of State's office to make arrangements for that meeting to happen at the earliest possible opportunity because I believe there is a place for this amendment in the regulations if it is not appropriate for primary legislation. On the basis of the commitment given by the Minister of State I will not press this amendment. My office will contact his office and we can arrange to meet in the very short term because this needs to be done as quickly as possible.

Amendment, by leave, withdrawn.
Section 7 agreed to.
Sections 8 and 9 agreed to.
Title agreed to.
Bill reported without amendment and received for final consideration.
Question proposed: "That the Bill do now pass."

The Tánaiste, the Minister of State, Deputy Troy, and myself would like to thank Deputies for their attendance, participation and support as we have taken this Bill through the Dáil over the past two days. I am conscious that the logistics were a little awkward between the two Houses. I recognise the efforts of Members to make their contributions and we value all of them. It has been a long debate over the past two days but I hope we all agree that it has been useful and will lead to necessary additional supports being put in place as a matter of urgency for microenterprises as they work to recover from the economic impacts of the Covid-19 health crisis.

It is appropriate that this first Bill of the Thirty-third Dáil is supporting those very small businesses across Ireland that are the lifeblood of our economy. All Members referred in their contributions to the importance of recognising the microenterprises and SMEs in that sector throughout the country, both urban and rural, which have a major impact on all our lives but certainly when it comes to job creation, the movement of money and the supply of services.

It is also historic, as this is the first Bill being debated and voted on outside Leinster House since the foundation of the State. As we are now showing our resilience as parliamentarians to react to the new normal, we hope the measures included in the Bill will help those very small businesses as they show their resilience in doing the same.

I reiterate my thanks to those Deputies and the various spokespersons who have been pragmatic and practical in their interventions and who laid out their ideas for further measures and actions, which the Government will consider as part of the July stimulus and the October economic package. In his opening remarks last night, the Tánaiste asked that Deputies would use the time on this Bill to include some of their ideas. I am conscious that many have done that and have put forward the ideas of their various parties. I thank them for their efforts in that regard.

I thank Deputy Louise O'Reilly for her agreement in regard to the amendment that we can move on to discuss it and try to get the best outcome. I believe everyone is committed to supporting businesses and that will be our aim during the next couple of weeks of debate both in this House and in the Upper House as we bring forward the July stimulus and, in the long term, the economic strategy we hope to bring forward in October, which is about the long-term survival and thriving of those businesses across many sectors. A major focus of all of us will be the retail sector as we respond to the new normal. I thank the Acting Chairman and the Deputies for their time.

Question put and agreed to.

The Bill will be sent to the Seanad.

Sitting suspended at 3.55 p.m. and resumed at 4.10 p.m.