Dáil Éireann Debate, Thursday - 16 October 2014
4. Deputy Dara Calleary asked the Minister for Jobs, Enterprise and Innovation the amount of loans guaranteed to date under the credit guarantee scheme; his plans to review the scheme to improve its take-up; and if he will make a statement on the matter. [39089/14]
Amharc ar fhreagraThis is the second anniversary of the credit guarantee scheme. It has not worked. The legislation to reform it is on the A list. Will the Minister guarantee that the legislation will be before the House prior to the Christmas recess? Will he indicate the kinds of change he proposes to make via that legislation?
The Deputy was unavoidably unable to attend, but we had an opportunity to present to the committee last week. We are seeking to proceed with the legislation with all haste.
The small to medium-sized enterprise, SME, guarantee scheme was launched in October 2012 in response to numerous calls from business interests. In the Irish context, it is a novel scheme that is continuing to develop a position in the financial arena. As of 30 June 2014, the SME credit guarantee scheme had 93 live facilities, resulting in €12.2 million being sanctioned through the scheme by the participating lenders and 468 new jobs being created and 236 being maintained. A further five loans had been fully repaid at that date, amounting to €450,000, which supported 33 new jobs and maintained ten.
As the Deputy is aware, I commissioned an independent review of the scheme which was submitted to me in the third quarter of last year. My Department has since worked to determine the improvements that can be made to the 2012 Act. I have prioritised this work and the Credit Guarantee (Amendment) Bill 2014 is now on the A list of the autumn legislative programme. We are working on the draft Bill with officials from the Office of the Parliamentary Counsel. Some of the proposed amendments it will address include: extending the maximum length of the guarantee from three to seven years; providing for a wider range of financial products to be covered, not just traditional credit products - for instance, invoice finance, factoring, leasing and overdrafts; providing for a wider range of providers of financial products to be eligible, that is, not just licensed banks; increasing the level of guarantee on individual loans from 75% to 80% and the portfolio cap from 10% to 13%; and removing the requirement for a formal decline letter. This revision is in accordance with the Government's policy to support access to finance for SMEs. I hope the Bill will be in the House before the end of the session.
Its partner scheme, the microfinance scheme, has been completely revitalised in the past few months and Mr. Michael Johnson is to be credited for bringing a new energy to it. That shows what could be done with this scheme. I want an absolute commitment that the Bill will be brought forward before the Christmas recess because this scheme needs to be given urgency. For those businesses which have loans with banks that are putting inordinate pressure on them to repay them or make other arrangements to facilitate their easy exit from the market, will the Minister consider opening the credit guarantee scheme to them to give them some breathing space in order that they can grow their businesses without pressure from banks that no longer have any interest in this country?
I will certainly consider that suggestion. We will make legislative provision for it, but it will require state aid approval if we extend support to SMEs dealing with banks which are exiting. There is another step besides improving the legislation.
The Deputy is right that one of the lessons we have learned is that the way in which banks manage internally the credit guarantee scheme and the way in which we promote it are areas in which we can do better. We will actively promote the scheme, as opposed to what we were doing previously, that is, providing the back office. We have also identified methods within the banking system to give more oxygen to the credit guarantee. The legislative changes we are introducing are essential to drive that new offering. I regard it as a priority and we will push ahead as rapidly as we can.
The review was also damning in regard to the complicated nature of accessing the scheme and the paperwork involved. Does the Minister have thoughts about reducing the paperwork and the complications?
Clearly, it is up to banks in terms of the application of the scheme. The paperwork is not what has held it back. In my view and that of the review group, the real impediments have been some of the conditions attached. A three year loan is not sufficient. We will streamline the scheme, but the formal letter of decline was an impediment and we are removing it. There are elements which have put barriers in the way of those using the scheme and we are trying to remove them. The scheme is working and the paperwork side is reasonably okay, but some of the elements have been unnecessary obstacles which we are seeking to remove.
