Dáil Éireann Debate, Wednesday - 15 July 2015
121. Deputy Bernard J. Durkan asked the Minister for Jobs, Enterprise and Innovation the extent to which the lack of working capital continues to be identified by indigenous small enterprises in the manufacturing and services sectors as an obstacle to expansion, and his plans to address this issue. [29289/15]
View answerGovernment policy since coming to office in 20111 has focused on supporting SMEs in accessing appropriate finance for both working capital and investment. The Action plan for Jobs process has specifically targeted access to finance issues as being central to the welfare of business. Under this process the SME State Bodies Group, chaired by the Department of Finance, was established and works to deliver on this agenda for all SMEs. A number of key policy initiatives have been developed which are contributing to the evolution of a more robust and effective platform for the financing of SMEs. These include:
- The establishment of the Strategic Banking Corporation of Ireland (SBCI) providing up to €800 million of funds;
- The development of an innovative SME State Support On-line tool to provide an individual with a list of the possible government business supports available to their particular business;
- Government agreement to amend the Credit Guarantee Act 2012 and introduce a new more flexible Credit Guarantee Scheme;
- The review of Microfinance Fund Ireland (MFI).
A recent credit demand survey conducted by Red C for the Department of Finance has found that improved trading conditions mean that far fewer companies are seeking credit in order to survive day to day financial pressures. Only just under half (48%) of those SMEs seeking finance between October 2014 and March 2015 did so for working capital needs, compared to 61% in the previous period. Improved turnover and profit have led to SMEs suggesting they fund working capital through internal funding/retained earnings (64%).
This Survey also shows banks are currently more likely to approve funding for working capital (69%) than for growth (61%). Decline rates for growth stand at 18%, with the decline rate for working capital at just 13%. Of course any SME who has been refused bank credit or has issues with the terms and conditions offered can appeal these decisions to the Government’s Credit Review Office.
As the economy moves into a new phase of growth there is an opportunity to further develop a policy agenda that addresses some of the structural constraints in the financing of the SME sector such as the need for improved payment practices in Ireland.
One initiative to improve payment performance in Ireland is the Government requirement that all central Government Departments pay their suppliers within 15 calendar days of receipt of a valid invoice. The recent launch of the Prompt Payment Code (PPC) portal is another important step in addressing the culture of late payments in Ireland. These initiatives, together with the late payment legislation, demonstrate the Government’s continuing drive and commitment to encourage a prompt payment culture in Ireland.
Building on the progress to date and further supporting the financing of growth within the SME sector will require a clear focus on how best to maximise the benefits to SMEs of the evolving financial landscape in Ireland. Our continued focus is on the adoption and delivery of actions that contribute to developing a more diversified and competitive financial system, capable of financing the growth potential of Irish SMEs
As a Government we will continue to maintain our focus on assisting SMEs to establish, scale and export in order to ensure that they continue to drive our economic recovery and create further jobs.
