I propose to take Questions Nos. 17 and 48 together.
Microfinance Ireland (MFI) offers loans for 3 or more years at 8.8% fixed rate for all types of business needs including working capital and financing of business equipment to people who have been refused credit by the Banks. The Banks are offering standard variable rates for business loans and overdrafts for working capital at interest rates ranging from 6.5% to 8%. The interest rate charged by MFI reflects the higher risk profile, lack of security and possibly lack of trading history of many of the MFI applicants. The rate charged by MFI gives the customer the certainty of a fixed interest rate and fixed monthly repayments.
I can confirm that with over six months trading history now behind it, MFI is currently reviewing feedback in relation to the features of the Loan Scheme in order to ensure that the loan is as accessible as possible to potential applicants while at the same time providing reasonable protection to the taxpayer and private funding underpinning the Fund. Launching a variable rate loan product is being considered as part of that review. I should add that there is no feedback or evidence that a modest lowering of the interest rate will materially change the level of applications as the motivation for applicants to apply for the loan is based on their needs of having access to credit - having already been declined by their bank.
The key challenge for MFI is to ensure that people are aware that there is support for new and existing viable businesses with perceived or real higher trading risk that have been refused credit by Banks. In that regard MFI has been engaged with key influencers across the country to get that message across. To date this has included:
- Meeting regularly with the Local Enterprise Offices and other support enterprise agencies at national and local level to ensure that the loan offering is understood and supported by them in their dealings with local communities;
- Mailshots to every TD in the country to ensure they have loan information, brochures and website details available at their regular clinics;
- Meeting the Banks and the Credit Review Office to ensure that they refer people declined by them to MFI;
- Make presentations at local micro and small business seminars and workshops across the country in order to heighten awareness of the loan fund.
In addition MFI has run three radio campaigns across both national and local radio stations to raise awareness of the loan fund amongst local communities. The loan fund is demand led and there will be on-going promotional and awareness activities to ensure that awareness of the scheme is promoted to its full potential amongst relevant micro business groups across all sectors of business.