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Why isn’t this government support for SMEs working?

Microfinance Ireland has approved just €3 million from a €90 million lending budget.

Image: Laura Hutton/Photocall Ireland

A GOVERNMENT-SPONSORED scheme that was supposed to provide €90 million in loans to small and medium enterprises has lent just €3 million since its launch in 2012.

The Microfinance Ireland scheme provides loans of between €2,000 and €25,000 to what it calls “commercially viable proposals that have been declined credit”.

However, despite much fanfare when it was launched in 2012, the scheme has approved just €3.022 million across 192 loans from a total of 475 applications, and attracted much ire from employer bodies.

Low demand blamed

MFI acknowledged today that it “would like to see more applications”, but blamed the low rate of demand for its service among borrowers for its poor performance to date.

In a statement, a spokesman said: “Our lending activity is demand-driven, and demand among borrowers has been lower than was originally anticipated.”

However, Patricia Callan of the Small Firms Association suggested that MFI had its messaging wrong from the start.

She said that the fund should be actively targeting start-ups and unemployed people, rather than established businesses. She also criticised the fact that applicants must be rejected by a bank before applying to MFI.

“The fact you have to go to a bank and be rejected is a hindrance. People want to be able to go and apply directly for these grants.”

She said that many small business people weren’t aware of the scheme thanks to poor communications and badly thought out strategies.

“Microfinance in principle is a good product – the budget should easily be exhausted, but are they getting the message out? I don’t think people even know if they exist.”

Great expectations

When the scheme was launched in 2012, Minister for Jobs Richard Bruton promised that 5,500 micro-enterprises would be able to avail of the scheme over its ten year lifespan.

At the launch, Bruton said that “the Government is acting to ensure that a much wider range of businesses who are refused credit by the banks have access to microfinance lending”.

The scheme is due to be reviewed this October, after it has been in operation for two years.

The original chief executive of the company, Adrienne Murray, left MFI earlier this year for personal reasons. Her replacement, Michael Johnson, is a former CEO of the Dun Laoghaire-Rathdown County Enterprise board, will take up the position later this month.

The Government wants to hear from cash-strapped SMEs>

Restrictive, badly marketed and poorly explained: Government finance scheme for SMEs is not working>

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