The Future Growth Loan Scheme (FGLS) was launched in April 2019 to support longer term access to finance for investments by SMEs including farmers and fishers and small mid-caps. The makes up to €300 million of loans available and is operated by the Strategic Banking Corporation of Ireland (SBCI) though participating lenders. The SBCI provides an uncapped guarantee of 80% to the participating financial providers. The scheme is underpinned by a counter-guarantee to the SBCI from the European Investment Fund (EIF), which is part of the European Investment Bank (EIB) Group. This counter-guarantee provides significant risk protection to the Exchequer against potential losses from the loan guarantee scheme. Losses to the scheme are shared as followed – 20% by the finance provider, 16% by SBCI and 64% by EIF.
The scheme was due to operate over a three year period, but the demand for the scheme has surpassed expectations such that the scheme is close to being fully subscribed after just one year of operation.
On 8 April, I announced that the FGLS would be expanded to make available a further €200 million in additional lending. Officials in my department along with officials in the Department of Agriculture Food and the Marine are negotiating intensely with the European Investment Fund on this expansion of the scheme. This work is now coming to conclusion and based on the negotiated costs achieved there is remaining capacity within the existing legislation of the European Investment Fund Act 2018 to release this new lending without amending the Act. Preparations are now being made towards making this finance available as soon as possible to SMEs, including primary producers, and this will be through participating lenders of the scheme.
In addition, my department has also negotiated a further €300 million in lending to be made available to SMEs, including primary producers, in further tranches through the FGLS over the period 2021-2022. This will bring the total quantum in new lending through the FGLS to €500 million.
Amendment to the European Investment Fund Act 2018 will be required to enable this additional €300 million in lending to be made available through the FGLS.
On 2 May Government approved the drafting of the necessary legislative amendment to the European Investment Fund Agreement Act 2018 to enable further agreements to be entered into with the EIF. This amendment has now been published in the Microenterprise Loan Fund Amendment Bill 2020, and will be urgently progressed through the legislative process.
The enactment of this legislation will allow for the full €500 million in new lending to be made available through the FGLS providing access to finance for the many businesses looking to invest in their long-term future, be that in response to COVID-19, to mitigate against Brexit impacts or to transform their businesses in terms of productivity, innovation and competitiveness to secure their future sustainability, growth and resilience.
The enactment of this legislation will also provide the legislative basis to allow for Ireland to enter into additional agreements with the EIF, allowing for the potential to provide in the region of €3bn in lending underpinned by EIF guarantees.
