Dáil Éireann Debate, Tuesday - 28 February 2006
53 Ms Burton asked the Minister for Finance the progress made to date with regard to the plan announced by him in budget 2006 for the establishment of a €100 million fund for social finance; when the fund will be established; the amount that will be contributed by financial institutions; the way in which the money will be drawn down; and if he will make a statement on the matter. [7927/06]
View answerThe aim of the Government's initiative that I announced in my Budget Statement is to give an impetus to the development of social finance in Ireland. I believe the initiative can make a real contribution towards expanding social finance provision in Ireland, thereby complementing the wide range of measures that are currently in place to promote and assist community infrastructure and local development, including the establishment of micro-enterprises. It delivers, in a significant way, on commitments made in Sustaining Progress, the current social partnership agreement, and in our programme for Government.
Investment in social and community infrastructure and local development has the potential to yield significant economic and social returns. These types of projects, however, often experience difficulties in accessing finance from mainstream financial institutions. This has led to a recognition both domestically and internationally of the need for new and innovative investment mechanisms such as social finance. The essence of the social finance concept is repayable loan financing provided at affordable terms for community-based projects and local development initiatives.
There are three distinct tiers involved in the delivery of the initiative: first, the creation of a social investment vehicle that will essentially perform the role of a wholesale financial intermediary, specialising in social finance funding, second, the arrangements for the on-lending of the funds for individual projects. The idea here is to use, as far as possible, existing agencies and established networks of social finance providers, third, community and local development organisations developing individual projects for social finance support and applying for social finance loans from the retail lending intermediaries.
A practical model for social finance funding is currently being developed. The intention is to keep the administrative structures as light as possible, consistent with meeting the objectives of the initiative, and ensuring that the funds are used effectively on a value-for-money basis. With a view to developing an effective model my Department has, to date, consulted with a number of public, private and voluntary bodies currently involved or with interests in this area, in addition to its discussions with the banking community.
A key priority is early implementation of the initiative. This will provide the opportunity to market test particular options, which can in turn inform the further development of the social finance initiative.
As far as the potential sources of funding for social finance provision are concerned, there has been a positive reaction from the banking community to my invitation to support the initiative. The banks expressed at budget time a willingness to contribute seed capital funding of €25 million to the initiative. The sum of €100 million referred to by the Deputy in her question may relate to a newspaper report at the beginning of this year.
I do not at this stage have a view on the eventual scale of funding that may be warranted. It is not clear at this early stage what the level of demand may be. Experience in the UK and Northern Ireland would suggest, however, that some caution is warranted to ensure that the funds available are applied effectively and yield value for money investments. I am satisfied, therefore, that the seed capital from the banks is sufficient to meet initial requirements for the initiative in light of the available capacity and capabilities to develop suitable social finance projects and manage social finance lending. In my Budget Statement, I indicated that I was keeping the door open to other contributors.
Advice has been sought by my Department from the Office of the Attorney General on the appropriate legal framework which would clarify the objectives, roles and functions of the investment vehicle, establish the type of delivery structure judged most suitable to the long-term requirements of social finance, and also deal with such matters as governance and accountability arrangements.
