Dáil Éireann Debate, Tuesday - 15 April 2014
117. Deputy Michael McGrath asked the Minister for Jobs, Enterprise and Innovation his views on whether the credit guarantee scheme provides good value for money for the firms participating in it; and if he will make a statement on the matter. [17464/14]
View answerThe SME Credit Guarantee Scheme (CGS) was launched in October 2012 in response to numerous calls from business interests. It is a novel Scheme in an Irish context which is continuing to develop a position in the Irish financial arena. As of 4th April 2014 the CGS has eighty-six live facilities resulting in €11.6m being sanctioned through the scheme by the participating lenders resulting in 446 new jobs being created and 296 jobs being maintained.
To avail of the SME Credit Guarantee, a borrower pays a 2% annual premium which partially covers the cost of providing the guarantee. The premium is collected annually or quarterly in advance throughout the three year life of the guarantee based on the annual contracted principal balance. This is to comply with EU State Aid requirements.
The Scheme is subsidised by the Government to facilitate additional transactions that would not otherwise have taken place. The availability of the guarantee makes the difference between the borrower not being able to obtain a loan and obtaining the loan.
The State Aid Regulations provide two alternative approaches to premium pricing in respect of loan guarantees, with guarantees able to be priced individually or on scheme-wide basis. For simplicity the latter alternative was recommended and chosen.
Recognising the current situation of the SME lending market in Ireland, it is difficult to justify making the case for a Premium Rate any lower than 2% and hence the Oireachtas decided to apply that rate.
My Department is currently working on changes that can to be made to the Credit Guarantee Act 2012, and the contents of a new Credit Guarantee Scheme, on foot of the independent review which I commissioned last year to make the Scheme more attractive and user friendly to business. This complex work is progressing as quickly as is practicable. I will ensure these legislative changes are made in 2014 as I have committed to do under the Action Plan for Jobs 2014. I will implement the review recommendations, as appropriate, with a view to enhancing the up-take and impact of the Scheme as soon as possible.
