I am aware that there are concerns about the cost of finance across the economy, including from Microfinance Ireland (MFI).
MFI was established as a private limited company with a Board of Directors. The Directors set the interest rate to be charged on loans under the Scheme 8.8% taking into account a number of factors including: prevailing market interest rates, the economic environment, specific risk factors and administrative overheads.
The Deputy will know that lending to microenterprises is high risk due to the high failure rates with business start-ups, little or no track record and no security available. Therefore, pricing of loans tends to strike a balance between the support of new start-ups and the erosion of the taxpayers investment in the Scheme.
With regard to the term length of the loan, the standard term is 3 years but may be extended up to 6 years maximum. Applications are assessed on their individual merits and in tandem with the on-going commercial viability of the business. This maximum term is a condition of the European Investment Fund (EIF) which is providing a guarantee for Microfinance Ireland to assist with the risk tolerance levels. The support and involvement of the EIF guarantee was a critical factor in the establishment of this loan scheme which otherwise would not make this new avenue available to such businesses that have difficulty accessing credit.
In its first half year of operation, MFI have not received feedback and have not been made aware of issues with regards to applicants being deterred from applying for loans due to the interest rate or term length, as having been previously declined by a bank, access to credit is the priority in seeking support for their new or existing business.
I can assure the Deputy that I am keeping all aspects of the Scheme under on-going assessment and that I am obliged under section 22 of the Microenterprise Loan Fund Act 2012 to commence a review of the operation of the Act not later than 2 years after the date of its passing.