Dáil Éireann Debate, Wednesday - 22 May 2013
30. Deputy Pearse Doherty asked the Minister for Jobs, Enterprise and Innovation if he will detail for each various credit initiative developed by his Department, if each scheme offers a rate of credit above, below or equal to the commercial rate. [24445/13]
View answerI have established two targeted initiatives to support an additional flow of credit into the economy by filling gaps where specific market failures in the supply of credit to SMEs exists, namely: the Microenterprise Loan Fund and the Credit Guarantee Scheme.
Microfinance Ireland (MFI) was established as a private limited company with a Board of Directors, to administer the Microenterprise Loan Fund. The Directors set the interest rate to be charged on loans under the Scheme at 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 strikes a balance between the support of new start-ups and the erosion of the taxpayers’ investment in the Scheme.
The Credit Guarantee Scheme is administered through participating lenders (AIB, Bank of Ireland and Ulster Bank). The interest rate charged and any other fees and charges applied to any facilities are a commercial matter for the participating lenders. Their decisions are based on their own assessments of the risks. A Premium Rate of 2% is payable by the borrower to the State in return for the 75% guarantee. A rate of this nature had to be set to ensure the Scheme complied with EU State Aid rules and it was set at the lower end of the potential pricing spectrum.
