Seanad Éireann debate -
Thursday, 28 Jan 2016

Vol. 245 No. 8

Credit Guarantee (Amendment) Bill 2015: Committee and Remaining Stages

Sections 1 to 3, inclusive, agreed to.

SECTION 4

Senator Mary M. White

I move amendment No. 1:

In page 9, between lines 34 and 35, to insert the following:

“(5) The Minister will commission a report within 3 months of the act becoming operational outlining how the Credit Guarantee Scheme can help make it easier for businesses that owe money to banks exiting the Irish SME market to refinance those debts with domestic institutions.”.

The original intention of the credit guarantee scheme when introduced in 2012 has not been met. It was very clear early in the life of the scheme that it would not work. Through no fault of the Minister of State's Department, we were left waiting for this legislation. In the meantime, a serious problem arose for businesses that were being forced to refinance their debts because their financial institution was exiting the market.

They were left to the mercy of the pillar banks or were being sold off to various vulture funds. While the Minister of State has extended the provisions of the scheme to allow for that, I am anxious that this particular cohort would be the focus of some attention by those institutions promoting the credit guarantee scheme. I would like to get a sense of the scheme helping those businesses and to see they are actually left to the responsibility of one of the pillar banks as opposed to one of these funds entering this space. Commissioning the report and inserting this provision into the Bill will allow us to assess the matter.

Minister of State at the Department of Jobs, Enterprise and Innovation (Deputy Gerald Nash)

I recall Senator MaryWhite's party colleague, Deputy Dara Calleary, made an identical proposal on Committee and Report Stages in the Dáil. I am not accepting it because this specific area is not appropriate for such legislation. While we foresee a strong role for the Strategic Banking Corporation of Ireland, SBCI, particularly in the operation of counter-guarantees, the Strategic Banking Corporation of Ireland Act 2014 does not empower the corporation to provide for loans direct to small and medium-sized enterprises, SMEs. It does not have the physical capacity or structures to engage in this activity. Any change to this is a matter for the Minister for Finance.

The Department, banks, as well as other finance providers, and the SBCI will actively promote the revised system and ensure businesses are aware of the possibilities available under the new schemes. Tying in what Senator Brian Ó Domhnaill said on Second Stage, the review for the Government touched on the need for better awareness raising and publicity of the benefits of this legislation to be rolled out across the regions to ensure all businesses are aware of the capacity of the new schemes under this legislation. This will be factored into the promotional activities we intend to undertake in this regard. The Department has already spoken to SME representative bodies, including IBEC, the Irish Business and Employers Confederation, ISME, the Irish Small and Medium Enterprises Association, the Small Firms Association and Chambers Ireland, on the need for comprehensive promotion of the revised legislation and ensure their constituent bodies are aware of the schemes. The Department will engage in a comprehensive publicity campaign and will update the public on progress on a quarterly basis through its website. I am sure the figures will be discussed in this and the Lower Houses from time to time.

Amendment, by leave, withdrawn.

Senator Mary M. White

I move amendment No. 2:

In page 9, between lines 34 and 35, to insert the following:

“(5) (a) The Minister shall work with his colleague in the Department of Finance to facilitate a role for state promotional financial institutions such as the Strategic Banking Corporation of Ireland in the scheme in order to enhance the provision of credit to SMEs directly.

(b) The Minister shall be empowered to give counter-guarantees designed to enable state promotional financial institutions access to match guarantee facilities from EU funding sources such as Horizon 2020 funds earmarked for SMEs and the European fund for strategic investment.”.

Picking up on the Minister of State's comments about the strategic banking corporation, the commitment he gave as a member of the Labour Party, as well as that given in the programme for Government - remember that - was that a State bank would be established which would be a separately functioning business bank to lend directly to enterprises. Instead, we got the SBCI which is a far fluffier version of what was proposed. The SBCI needs more teeth. It is beginning to have an impact, for which I give it credit. However, its role as an agent of the existing pillar banks is hampering its standing and its ability to do what we want. We need the commitment in the programme for Government to be honoured in the form of a separate, State-backed enterprise bank out there fighting on the streets and dealing directly with the customers.

Deputy Gerald Nash

This was also raised in the Dáil by Senator Mary White's party colleague, Deputy Dara Calleary. On Committee Stage in the Dáil, I introduced a comprehensive new Part 3 containing provision for the SBCI to work with the Minister through this legislation to continue to enhance the provision of credit to SMEs. It also provides a role for the Minister to be able to give counter-guarantees intended to enable the SBCI to unlock funds from EU sources to share the risks across the banks, the SBCI, the Minister and the potential EU sources. Care was taken not to limit the possibility in the future of other promotional financial institutions also operating in this space without the need for recourse to primary legislation. This allows us flexibility to deal with this fast evolving area.

Funding from EU programmes includes COSME, competitiveness of enterprises and small and medium-sized enterprises, Horizon 2020 funding, as well as the European Fund for Strategic Investment administered by the European Investment Bank and the European Investment Fund, otherwise known as the Juncker plan. These will all be critically important for economic development in Ireland for the foreseeable future.

Amendment, by leave, withdrawn.

Section 4 agreed to.

Sections 5 to 20, inclusive, agreed to.

Title agreed to.

Bill reported without amendment.

Acting Chairman (Senator Diarmuid Wilson)

When is it proposed to take Report and Final Stages?

Senator Aideen Hayden

Now.

Agreed to take Remaining Stages today.

Bill received for final consideration.

Question proposed: "That the Bill do now pass."

Minister of State at the Department of Jobs, Enterprise and Innovation (Deputy Gerald Nash)

I thank Senators for their consideration of this Bill and constructive contributions, as well as those of my Dáil colleagues. As regards the original 2012 legislation, the Government faced an economic and employment crisis and the plight of SMEs was never far from its mind. SMEs account for most employment in this country and were starved of finance, a major challenge for the incoming Government. It responded on many levels, including the establishment of Microfinance Ireland, the SBCI and the Credit Guarantee Act 2012. These were coupled with enterprise-oriented budgets to deliver an economic recovery. We are now seeing the benefits of these actions. However, we did not leave it there with the 2012 Act. We kept the operation of its schemes under review. The review stated in school report parlance that we could do better. Accordingly, we responded with the propositions in this legislation to make the credit guarantee scheme work better. I am sure we will see the benefits of the changes in the years to come. The Action Plan for Jobs 2016 has a chapter on finance for growth. I hope improvements in our economic performance are mirrored in the switch in emphasis on the survival of our SMEs to their potential for significant growth in the period ahead. In this context, this reformed and expanded legislation will pay a major role in SMEs as time goes on and help to deliver on our Action Plan for Jobs 2016 target for 200,000 net additional sustainable jobs by 2020 for the benefit of everyone. I thank Senators for their support for this important legislation.

Senator Mary M. White

Fianna Fáil welcomes the Credit Guarantee (Amendment) Bill 2015, which vindicates its criticism that the credit guarantee scheme was not providing for sufficient lending to viable small and medium enterprises, SMEs, which under normal lending criteria are unable to obtain new or additional facilities from their banks. The scheme was supposed to facilitate this by providing banks with a Government-backed guarantee. The measures outlined in this Bill must result in improved lending under the scheme to SMEs. While I am confident that will happen, we will keep the pressure on to ensure it does.

Senator Aideen Hayden

I thank the Minister of State and his officials for bringing this important legislation before the Seanad. It is welcome that it has been supported by all sides of the House, which is indicative of the importance of SMEs and SME financing in this country. As stated by many speakers from all sides of the House, the SME sector in Ireland is critical to the economic recovery of this country, including in terms of employment.

Senator Mary White raised a number of important points in her amendments. There has been acknowledged disappointment that the scheme as introduced did not bring about the level of engagement expected. I am confident, as, I think, the Minister of State is, that the revisions being made to the scheme will improve the situation for SMEs in this country. Senator White also raised the issue of the importance of access to finance by SMEs, particularly those SMEs that owing to the recession are now heavily indebted and are finding it difficult to get finance from our banking sector, which sector, I might add, we ploughed €62 billion into in order to rescue it.

I welcome the announcement in December 2015 by the Central Bank of the introduction of new regulations that will make the system in relation to access to credit more transparent. The Governor has expressed confidence that following the introduction of the new regulations, where a business that, with its lender, has been restructured and is still having difficulty obtaining finance, that situation will be open to review. I do not believe any of us can stand over a scenario whereby viable SMEs are now being unduly prejudiced by the hard times they faced owing to the collapse of the economy.

This is important legislation. We are happy in this House to have seen it concluded in the lifetime of the Government.

Question put and agreed to.