Changes to the Government’s microfinance support fund were yesterday welcomed, with the improvements tipped to open the scheme up to more businesses and improve awareness among SMEs.
Businesses looking to access loans of up to €25,000 from Microfinance Ireland (MFI) will no longer require a bank refusal before being considered, as part of the changes unveiled yesterday.
For companies refused bank credit, however, an automatic referral system from the bank to MFI will be put in place to help boost activity levels.
Launching the changes, business and employment minister Ged Nash said: “More than 90%, of our businesses are micro-enterprises employing more than a quarter of the workforce engaged in the private sector. Yet, they face much greater difficulty in accessing loans.
“Microfinance Ireland has had some success in assisting such micro-businesses, but by making some changes they will be able to help many more,” said Mr Nash.
The alterations to rules governing Microfinance Ireland were welcomed by Chambers Ireland, which said the removement of the requirement for companies to have been refused bank lending will open the scheme up and allow a greater number of innovative businesses to access credit.
The changes are to be implemented following a review of MFI, which found the scheme was underperforming and that initial goals were too ambitious and misplaced in the context of the country’s economic climate.
Since its inception in October 2012, MFI has supported over 740 jobs in 333 micro-enterprises who employ 10 people or less, with a total outlay of €5.14m on the back of a 57% approval rate.
Activity to date has fallen shy of anticipated levels as the expected pent-up demand for microfinance didn’t materialise given firms’ preference for dealing with their legacy debt as opposed to taking on new loans.
Recent increases in the number of applications being received by MFI would suggest a slight turning of the tide in the attitude of potential borrowers, however.
Sligo (71%) and Mayo (61%) had the highest approval rates in the country with 10 and 14 successful applications respectively, while Louth (27%) and Leitrim (9%) fared the worst in terms of successful applicants. Loan applications from Cork were approved 42% of the time, with Limerick on 44%, Dublin 49% and Kerry 55%.
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