Credit Guarantee (Amendment) Bill 2015


Dáil Éireann 26 November 2015

Thank you for the opportunity to speak on this Bill.

Providing greater ease of access to credit for small and medium enterprises is at the core of the current debate on the Credit Guarantee (Amendment) Bill.

The Scheme, established three years ago, sought to augment rather than replace, conventional access to credit and it is important that this Government continues to review the operation of the scheme and make amendments where necessary.

I know that over €31 million euro has been made available through the scheme to date, resulting in the creation of over 860 jobs and the sustaining of over 600 others, however the scheme has never fully met expectations and a review in 2013 provided some likely explanations for that and the inadequacies highlighted by that review are the subject of today’s Bill.

One crucial change that will be brought about by today’s Bill is the inclusion of non-credit products such as invoice financing and leasing and of course, the inclusion of overdrafts.

The key to the success of this scheme is the fact that the state guarantees 75% of the loans, while at the same time benefiting on a number of fronts from the resultant job creation.

Banks still have to be prudent, given that only three quarters of the loan is guaranteed by the state, but it does allow banks in certain situations to provide finance to small and micro businesses that it would not consider otherwise. These are the businesses that will be at the cornerstone of any revival in the country’s finances and the credit guarantee scheme is just the type of common sense measure that is needed to kick-start job creation and ensure that entrepreneurs do not have needless obstacles put in their way as they seek to establish fledgling businesses.

Only about a quarter of SMEs anticipate that they will seek credit in the next six months, a figure that has remained relatively constant since late 2012. Meanwhile the number of SMEs actually seeking credit is declining, down from 40 percent three years ago to 32% in the most up-to-date figures available. Irish SMEs are much more reluctant to borrow than their European counterparts, evidence of the depths to which the economy plummeted after the crash. I believe that many SMEs that struggled to repay loans through the worst of the recession will remain shy of lending for many years yet and will only seek loans where investment or expansion will result in gains in the short to medium term.

One element which may discourage Irish small and medium enterprises from applying for funding is the high rejection rate for loan and overdraft applications, which is consistently over 15%, while the European average is nearer to 9%.

The Credit Guarantee Scheme has proved very good value for money for the Irish people to date. The net cost per €100 million of lending is €1.885 million and when one sets against this the direct and indirect tax collected, employment created and the resultant reduction in the Social Protection Bill, the benefits of the scheme become readily apparent.
Some of these fledgling businesses will later prove not to be viable, but many will flourish and grow and with proper supports, have the potential to make a significant contribution to Irish social and economic life.

As one measure of the Action Plan for Jobs, I believe that the Credit Guarantee Scheme has worked, but has not fulfilled its potential. The measures contained in this Bill aim to ensure that the Scheme can grow in coming years and provide more much-needed money for investment in small and medium enterprises across Ireland.