Loan Guarantee Schemes Agreements (Strategic Banking Corporation of Ireland) Bill 2021: Committee Stage

Sections 1 to 4, inclusive, agreed to.

In page 4, between lines 31 and 32, to insert the following:

“Interest and repayments

5. The Minister shall engage with the relevant business and agriculture stakeholders and representee groups regarding the application of favourable interest rates to monies loaned in accordance with this Act.”.

I note the Minister of State's earlier reference to the banking sector in which he referred to "because of what happened". Is he referring to when Fianna Fáil drove the economy off a cliff? The amendment is a fairly simple one. It provides that the "Minister shall engage with the relevant business and agriculture stakeholders and representee groups regarding the application of favourable interest rates to monies loaned in accordance with this Act."

The legislation to introduce this scheme provides for a broad framework for the provision of the moneys to be loaned out for the purpose of providing appropriate access to finance options to SMEs, including those in the primary agriculture sector, to address liquidity issues arising from the impacts of Brexit and to support investment in a post-Brexit environment. We all support that and it is exactly what we want to see done. However, many of the issues businesses encounter in accessing finance are not a result of what is in our legislation, rather of how these loan schemes are administered. A number of schemes have been established, particularly to help businesses overcome the effects of Brexit and Covid-19 but some are not being accessed for a multitude of reasons and that has to be addressed.

The same holds true for the moneys in this Bill that will be loaned. For instance, the Covid-19 credit guarantee scheme is guaranteed to the tune of €2 billion yet, to date, only €283 million has been loaned out under that scheme. Again, the Covid-19 working capital scheme which has seen €425 million in lending made available has had only €138 million worth of approvals made.

The future growth loan scheme has seen €679 million of the €800 million issued in loans and the future growth loan scheme expansion has seen €421 million out of the €500 million loaned out. These schemes are provided through the Strategic Banking Corporation of Ireland and administered by financial institutions. It is clear the scheme, as administered, remains key to strong uptake and the success of the loans. How it is administered has a direct impact on who can access it and how many people do.

The crux of the amendment is that the Minister will engage with the relevant business and agriculture stakeholders and representative groups regarding the application of the favourable interest rates to moneys loaned in accordance with the Act. I hope this is done in any event, but this amendment is needed so we can at least have this discussion on matters such as interest rates, length of repayments and so forth.

I very much look forward to the Minister of State's reply because this is an important issue. Business owners and people in the agriculture sector of have raised it with me and I hope the Minister of State will be able to address it.

I thank Deputy O'Reilly for her support for the Bill in general and I accept the reason for the amendment. It is a valid point that we engage with businesses. I assure the House, if anyone wants to check my diary as proof, that is what we do and have been doing practically every day since I took up this position in the Department last July. I am happy to engage with businesses of all sizes throughout the country and the representative bodies through the various forums in which we are involved. We try to give as much access as can.

We also try to respond to any Deputies, be they spokespersons or not, who raise issues to us. A few matters were referred to earlier but few details were given. I will be happy to follow them up, however, as we try to respond as best we can.

The number of references to change in policy brought through are in relation to the ongoing consultation to assess needs. A number of reviews and assessments of what is required have also been carried out by the Central Bank, the Department of Finance and many other bodies. It is generally accepted that access to finance is the big issue. Of course, everyone wants to have finance at as low an interest rate as possible but what is more important is the ability to access it, get one's hands on it, draw it down, put it to good and productive use and repay it.

We want to keep costs as low as possible. I cannot accept the amendment because ongoing engagement is a given and it is not a matter for legislation to insert provisions on favourable interest rates. These cannot be defined in statute but interest rates can be and are being discussed as part of the SBCI negotiations with finance providers. That is an open, competitive call and the providers bring forward their offering regarding what they are prepared to do.

Low interest rates and favourable terms and conditions are a feature of the State-backed loan schemes and we have proven that with all the other schemes that are currently available. The interest rates being offered under the Covid-19 credit guarantee scheme are less than 3% on 95% of the funding that has been drawn down.

On the different products that were available, those falling in the 2% to 2.5% category had a value of drawdown of approximately €8.5 million so far. That is not a major uptake. In the next category of between 2.5% and 3%, which Deputy O'Reilly referenced, there were 6,501 applicants, of which 4,551 were approved. The amount approved was €380 million. These figures show we made changes to the credit guarantee scheme. A new scheme was introduced last September and discussed in the House. It recognised that we needed to change the criteria to give access to food producers, lengthen terms and have a more competitive call.

We brought many more players into the scheme, including credit unions. There has been an immense response and up to €2 billion extra has been allocated for the scheme because we expect, from our engagement with the sectors and our research, that there will be a greater demand for these loans products as we reopen and deal with that. We believe we are ready to deal with that. There is a €2 billion limit guarantee and we can extend that, if necessary, by a further €2 billion, so we can respond to demand. I assure everybody of that.

The scheme discussed today provides a capacity of €330 million for loans to be drawn down. We can go beyond that, if need be. Overall, all the products are responding. The future growth loans scheme was successful. A capacity of €800 million was in place. There were 3,292 applicants and the value of that was €684 million. Some 2,731 loans of the 3,292 loans sanctioned so far have been drawn down.

The two schemes we are replacing with this scheme, the Brexit loans scheme and the Covid-19 working capital scheme, were not very successful in terms of drawdown. That is why we are replacing them. We are responding to the signs and obvious feedback we are getting in the system.

The Brexit loan scheme kicked in 2018, whereas Brexit went on and on and really only kicked in this year. Many businesses stalled their preparations and assessments of the difficulties with Brexit. I always say to businesses, even if they think they do not need borrowing today, to look ahead to the rest of this year and next year and put in place a loan approval under these schemes and frameworks. They will then have it in place and will be ready to deal with what comes at them in the months thereafter. None of us fully knows what sectors or businesses are in a strong enough position to survive the months ahead. We hope the majority are and we will support them. I suggest to companies that they take financial advice, get loan approval and be ready if they need it rather than being hit with a cash shortage all of a sudden and then trying to access a loan. In saying that, these loans will be processed quickly, but there are criteria to be met. It is taxpayers' money with a credit guarantee which involves the EU guarantee. It is de-risked, from our point of view, with the EU involvement, but applicants have to meet reasonable criteria to draw down the money.

That is what it is there for. As part of this scheme, businesses have to show that they trade with the UK. It is a good scheme and we have responded to businesses' needs. The credit guarantee scheme proved that when we make changes, things work. The overall drawdown of the various schemes and loan products is just under €1 billion. The amount drawn down is €988.7 million and the amount sanctioned is close to €1.3 billion. The systems are in place to work with companies that need this support.

The Microfinance Ireland loan was very successful as well. Some 3,789 loans have been sanctioned in that space, with 3,409 drawn down. Again, that is a demand-led scheme so there is no specific ceiling there. We are happy to engage and I encourage that engagement. We are responding to businesses. I understand what the Deputy is seeking in her amendment. We have previously discussed that I cannot write the interest rate into the law. I asked the Deputy during that conversation to trust me that the system would respond and that there would be a reduction in the products, and I think it is fair to say that we can see that reduction. There has been an average reduction of between 2% and 4% in all the products available under these schemes. We have matched what we said we would do here but we cannot write it into legislation because the cost of money and everything else associated with it can change.

Is the Deputy pressing the amendment?

I am not, on the basis of the assurances given by the Minister of State. His engagement with businesses is important. I understand that engagement is ongoing and I have no interest in looking through his diary because I know it happens. However, it is also important that engagement happens on a one-to-one basis as well as in the bigger forums. Only by doing that on a one-to-one basis and engaging directly with the people who are at the business end of this, if the Minister of State will forgive the pun, can he ensure these schemes work. What we all want, no matter what side of the House we are on, is something that works. We all want to see our local businesses back up and running, particularly the small to medium enterprises and family-run businesses. We do not want them to be crucified with debt but we do want them back up and running as quickly as possible. On the basis of the assurances given by the Minister of State, I am happy to withdraw the amendment. I encourage him to have those one-to-one engagements as well as engaging in the broader, bigger forums.

I assure the Deputy that we do have one-on-one engagements. I have an interest in finance due to my background and I often engage with companies on a one-on-one basis to assess their figures. A question was asked earlier about companies that do not pay rates and are missing out on supports. While they do receive the wage subsidy payments and can access finance and some of the schemes, they are not getting access to all of them. We have engaged with that sector and I have engaged with quite a few of the different businesses that do not have a rateable premises. We have gone in behind the figures to see what fixed costs they have been dealing with every day and week for the last year. We are trying to respond to their needs as well and we can only do that by engaging with them to assess their costs and difficulties. That is what we do and that is a part of the work that I enjoy doing. I assure the Deputy that that is being done.

Amendment, by leave, withdrawn.
Section 5 agreed to.
Title agreed to.
Bill reported without amendment, received for final consideration and passed.