SME funding: our plan
Our Finance Minister Michael Noonan writes that experience from other countries has shown that the establishment of a bank specifically for small businesses incentivises demand, builds confidence in the SME sector, and spurs on investment in growth and employment
'Make Ireland the best small country in the world to start a business' - this was the challenge set by An Taoiseach which faces every arm of Government and the State.
Behind this statement there is an understanding among government that it is businesses, both large and small, that drive growth, create jobs and generate the economic activity and resources to fund our vital public services and our citizen's daily lives.
While large investment and expansions by multinational companies dominate the headlines, it is in thousands of small- and medium-sized companies that over 70pc of people go to work in each day. Supporting these SMEs to grow, expand and create jobs is a key priority of Government.
The fortunes of businesses in Ireland are intertwined in the fortunes of the Irish economy, and for many of our exporting companies, the prevailing conditions in our main trading partners. Irish SMEs like their counterparts across Europe, have had to operate in a more challenging financial environment.
That is why one of the first and probably most significant achievement of the Government from a business's perspective was to restore stability and confidence in Ireland.
We have now come through one of the greatest economic challenges and the recovery is under way and jobs are being created. Domestic demand is improving and our main trading partners are forecasting stronger growth this year and next.
Nevertheless, as set out in the Medium Term Economic Strategy, the Government will continue working to broaden the recovery and to support businesses to grow and create jobs.
Funding and credit for SMEs is a major part of this and the Government has made significant progress in ensuring businesses now have access to a more diverse range of bank and non-bank financing.
We will continue to be pro-active in introducing new and innovative policies to enhance SME access to finance. This week, for example, the legislation to establish the Strategic Banking Corporation of Ireland (SBCI) passed through all stages in Dail. This legislation marks a major milestone and will result in longer term, flexible and appropriate credit to SMEs across the country later this year.
Initially, the SBCI will draw on over €500m of funding from KfW (the German State Promotional Bank) the European Investment Bank (EIB) and Ireland Strategic Investment Fund (ISIF). By 2018 this will grow to €4bn and the funds will be available to SMEs through high street banks.
The experience from other countries is that the establishment of a SME-specific bank incentivises demand, builds confidence throughout the SME sector, encourages competition and thereby encourages investment in growth and employment.
This ground-breaking policy initiative builds on and complements a broad range of initiatives that are supporting businesses access credit, reduce cost and fund expansion.
The €6.8bn Ireland Strategic Investment Fund for example, will be established by the end of the month and will present great opportunities for Irish companies. Already the fund is investing in Ireland and has established three long-term funds of the order of €850m. The fund has also partnered with both Silicon Valley Bank and China Investment Corporation for additional SME Funds.
There are currently over 80 separate Government supports totalling over €2bn available to SMEs to establish and grow their business. We want these supports to be fully utilised. However, there is a lack of awareness amongst SMEs of the full suite of supports.
To address this we have designed the 'Supporting SMEs' online guide which helps small businesses to navigate through the range of Government supports that may potentially be available to them. This guide can be accessed on the websites of the new Local Enterprise Offices. Since its establishment in April the site has received over 10,000 unique visitors and is proving to be a very useful resource for SMEs.
While much of the focus in recent years has been on the measures that have been taken to restore stability - we also ran a parallel economic growth programme supporting businesses across the economy.
The approach has been multifaceted ranging from broad measures to support credit supply to tax initiatives to support key sectors of the economy.
On the FDI front, Ireland has remained a world-class destination for investment thanks to the IDA's excellence in attracting multinational investment. However, in order to achieve the economic growth and jobs in every county, the Government has targeted key sectors including tourism, agriculture, retail and construction.
These sectors are the drivers of economic growth and job creation in every corner of the country. In Budget 2014 alone, over €500m in tax reductions were taken to support SMEs operating in these sectors.
In the hospitality and tourism sector for example we maintained the lower 9pc VAT rate in the sector and we abolished the air travel tax. The reaction by Ryanair and the other airlines to the reduction in this tax is exactly the type of response that I was hoping for - as soon as the measure was announced in the Budget a commitment was made to bring over one million extra passengers to Ireland this year.
We have also seen over 16,000 jobs created in restaurants, hotels across the country since 2011 which has been a huge boost to the economy. In the construction sector we introduced the Home Renovation Incentive to support activity in the sector. Since its introduction the scheme has supported approximately 2,000 contractors carry out over €110m in works on 5,500 homes.
So while businesses create jobs, Government has a key role to play in creating the right conditions to incentivise investment.
With all of the economic and fiscal data suggesting that the recovery is well under way in 2014, we will continue to introduce measures that broaden the recovery and support businesses to grow, expand and create jobs throughout the country.
We will continue to be pro- active in our approach and take steps to create a more robust, dynamic and innovative indigenous SME sector that will drive ongoing economic recovery and create jobs.
Sunday Indo Business