DÁIL QUESTIONS WITH DEPT FOR BUSINESS ON MICROFINANCE AND SMEs

  1. Deputy Thomas P. Broughan asked the Tánaiste and Minister for Business, Enterprise and Innovation the number of microfinance and loan guarantees under her Department’s indigenous enterprise development division which were granted in 2015, 2016, and to date in 2017; the value of this finance and loans in each of these years; the areas and sectors receiving this support; and if she will make a statement on the matter. [42767/17]

Deputy Thomas P. Broughan: When the Minister and the Minister of State are rambling around the country, they always say that access to working capital is the key issue for SMEs. How are Microfinance Ireland and credit schemes for indigenous companies performing, in particular the credit guarantee scheme, CGS, 2017? The counter guarantee scheme still awaits the publication of a statutory instrument.

The Government announced a new €300 million Brexit fund. How will that operate in particular to support SMEs?

Minister of State at the Department of Business, Enterprise and Innovation (Deputy Pat Breen): I thank the Deputy for his questions. I propose to take Questions Nos. 6 and 9 together.

The Board of Microfinance Ireland, MFI, provides me with quarterly reports of progress and these reports are published on the websites of both Microfinance Ireland and my Department.

The latest available figures, up to end of quarter 2, 2017, show that there have been 2,966 applications received with €19.6 million worth of loans approved and 1,172 drawdowns of loans worth €16.6 million in total. The fund has supported 3,145 jobs. Support activity is widely distributed both by geography and sector. Activity by county and industry is published in the quarterly reports. I will send a copy of the quarter 2, 2017 report to both Deputies for their information.

A total of 22% of all loan approvals have gone to Dublin; 16% to the south east; 13% to the Border region; 11% to the west; 11% to the mid-east; 10% to the south west; 8% to the mid-west and 9% to the midlands.

The most popular sectors supported are wholesale-retail trade, repair of motor vehicles and motor cycles at 22%, manufacturing at 12% and construction at 8%.

There were 357 loans approved in 2015 totalling €5.4 million, 397 loans approved in 2016 totalling €5.4 million and 178 loans were approved up until the end of June this year totalling €2.5 million.

During 2015, in line with the Microenterprise Loan Fund Act 2012, the performance of MFI was reviewed in detail by my officials, and the implementation of changes led to better performance, flexibility and advertising of its products. A key change was the removal of a previous requirement for a microenterprise to have been refused a bank loan before recourse to this channel.

Microfinance Ireland is guided by its new strategy, The Way Forward 2017-2021. At the centre of the new strategy is the strategic vision which provides for the need for MFI to create a value proposition by being the best in class micro-lender, creating and supporting jobs and fulfilling the borrowing requirements of microenterprises across Ireland. The strategic vision also aims to exceed the strategic objective of the fund of supporting the creation of 7,700 jobs in Ireland.

This new strategy is bearing fruit as the organisation was recently awarded a certification of compliance with the European code of good conduct for micro credit provision. This certification confirms MFI’s position as a best in class micro credit provider in Europe, being one of the first institutions in Europe to qualify and the only organisation in Ireland to receive this award.

With regards to loan guarantees, 108 facilities were sanctioned under the CGS in 2015 totalling €20.4 million, 131 facilities sanctioned in 2016 totalling €22.8 million and in 2017, up until the end of June of this year, 70 facilities have been sanctioned totalling €9.2 million.

The percentage of sanctioned lending breaks down as 55% to the east, 10.6% to the mid-west, 10.2% to the south west, 8% to the south east, 6.6% to the midlands, 5% to the west, 2.6% to the north east and 2% to the north west.

The most popular sectors in receipt of support include information and communications technology at 20.8%, wholesale-retail trade and repairs at 16.8%, manufacturing at 13.9% and human health and social work at 9%. I will provide the Deputies with charts showing the full breakdown of the regions and sectors supported by Microfinance Ireland and by the CGS.

Deputy Thomas P. Broughan: I thank the Minister of State for his comprehensive reply. He indicated that Microfinance Ireland processed 3,000 applications to the value of €19 million in loans. The average loan was €15,000. The approval rate, however, over the five years is less than 46% and that includes some applicants who were turned down originally and later approved. There is, therefore, a large gap for small businesses and young entrepreneurs that are struggling to get going. According to the regional breakdown, the west and north west have received a relatively small level of support. I acknowledge the Department is adopting a regional approach. In particular, is special support provided for women entrepreneurs given two thirds of the successful applicants were men?

Was there much uptake of the credit survey by the Credit Review Office? What feedback is the Minister of State getting? As he said when he visited our small business centre in Coolock, access to working capital is critical. The Minister has also made similar comments.

Deputy Pat Breen: I thank the Deputy for his questions. The microenterprise loan fund was set up in 2012 in difficult circumstances when many SMEs and microenterprises were unable to secure loans from the traditional banks. A review was conducted in 2015. According to the breakdown, 24% of the loans go to women and the figure is the same for Microfinance Ireland.

I have given the Deputy a breakdown of the statistics on where the loans are going. Some 78% of the loans are going outside Dublin. It is important that we are creating more jobs outside Dublin as well. It has a role to play, although in recent times since the review there has been a slowdown on that. Officials in the Department are meeting with MFI and the local enterprise office to see how we can fill the gap the Deputy has spoken about because that gap exists. Hopefully, they will come up with a resolution to ensure the viability of microfinance into the future. When Microfinance Ireland was established there was a different climate. Commercial banks are obviously lending a little more now as well. Incidentally, today is National Women’s Enterprise Day and there are many events around the country. It is an appropriate time to expand.

Deputy Thomas P. Broughan: The Brexit loan scheme amounts to €300 million. Obviously these small businesses are critical as we go through the next couple of years, regardless of what happens. Perhaps the Brexit situation might not happen but if it does this is a core area of the economy that we must strongly support. I note that the bulk of the funding is coming through the Strategic Banking Corporation of Ireland, but the Minister mentioned, and it is referred to in the Estimates, that there would be resources there for SMEs, that is, companies that have less than 500 employees. The Department is providing €23 million of the initial seed fund and the Department of Agriculture, Food and the Marine is providing €9 million. What targets does the Minister have for that to shore up what is perhaps the most important area of our indigenous economic performance?

Deputy Pat Breen: First, it was very good news for our Department that we got this Brexit loan scheme in the budget. We are also looking at the counter guarantee scheme that the Deputy mentioned as well. It is expected that another statutory instrument will be made providing for the Minister to share the risk with SBCI in such a way that the SBCI can in turn access and draw down EU funding for Irish SMEs. With regard to the €300 million fund, 40% of that will be guaranteed by the European Investment Bank, so it will cut down our guarantee. We are guaranteeing 80%. We are providing €14 million of that and the Department of Agriculture, Food and the Marine is providing the other €9 million. The details of that will be worked out. The Tánaiste gave some details on the Brexit loan scheme earlier. I have a limited amount of time now so I will forward that information to the Deputy. It will be useful for him to have it. It is an important incentive for small and medium enterprises that are facing the challenges of Brexit. Having that cushion is important. The fact that the funding will be co-guaranteed by Europe and Ireland is also important. It is a €300 million fund and, as the Tánaiste said, it is first of other schemes we will be considering to ensure that the SME sector will grow. It is a very important part of the Irish economy comprising 97% of enterprises in the country.