€100 million in micro-finance loans for business

The government is making plans to set up a new ‘micro-finance’ fund to partially guarantee loans for small businesses.

The new plans were announced following a Cabinet meeting on jobs and employment.

The fund is expected to become available at the beginning of 2012. Until then, the legislation must be prepared, and capable staff found to manage the project.

The fund is designed to benefit more than 5,000 businesses for the next 10 years.

The entire fund will be about €100 billion, to which another €10 million of Exchequer funding may be added.

Government business loans

The purpose of the fund is to guarantee loans to businesses who have trouble qualifying for one. Because the government will partially guarantee the loans, the banks will have less risk. This will make it easier for them to loan money.

The actual guarantee of the government will be based on the sums that the small businesses will request. The more demand, the lower the guarantee. This is because the fund has a fixed sum that will need to be divided among more businesses.

All government departments have quarterly targets to boost employment numbers. Similar measures, like for example this fund for micro-finance loans, are called “action plans for jobs” by the people who are working for government. This is because all of these action plans have one purpose: to boost employment numbers. And they are about doing something rather than just talking about it.

SFA (Small Firms Association) director Patricia Callan was happy with the move. She also added that the scheme doesn’t mention specific numbers regarding the amount that’s going to be guaranteed by government. She said: “We need a scheme with significant scale in the order of €400m and we need the Government to commit that it will meet the demand in full for guarantee funding from small businesses” She pushes for a higher commitment from the government. With €400 million commitment, the loans will become practically risk less for the banks.

Small business group ISME characterized the plan as “much ado about nothing”. Mark Fielding is the ISME’s chief executive. He said that the new plan is doesn’t bring anything new under the sun. The exact same plan was proposed and promised months ago. This is why he calls it “another announcement about an announcement”.

The fund was announced at a moment when the government is reportedly unable to sell 9 year bonds with an yield of less than 9%. This may mean that the fund would be guaranteed with borrowed money.