Microfinance Ireland (MFI) has had to suspend its lending to small businesses until the law is amended to provide increased funding, the Dáil has heard.
The agency lends to businesses that cannot access bank finance and which have nine employees or fewer.
Tánaiste Leo Varadkar, who is working on the July stimulus package to be launched in the Dáil next week, introduced the Microenterprise Loan Fund (Amendment) Bill to provide for that increased funding.
Mr Varadkar said “the level of demand for funding from microenterprises has been so large that MFI had to pause its lending from the beginning of last week”.
The fund makes loans of up to €50,000 available, but opposition TDs have criticised the interest rates of between 4.5 per cent and 5.5 per cent being charged after a six-month interest free period.
The Tánaiste, who is also Minister for Enterprise, Trade and Employment, said lending would resume when increased funding can be made available once the Bill is passed, he said.
The legislation will also increase from €75 million to €500 million the cumulative limit on schemes for small and medium-sized enterprises that are funded through the European Investment Fund.
Mr Varadkar’s predecessor as minister for enterprise, Heather Humphreys, launched a €20 million microenterprise fund for small businesses in the face of an unprecedented collapse in economic activity.
The Tánaiste pointed out that 79 per cent of loans last year were to businesses outside Dublin, and this underlined the importance of this legislation for small firms in rural Ireland.
Up to June 26th 581 loans had been approved for a total of just under €16 million and Mr Varadkar said he expected demand to “continue to accelerate as our economy reopens”.
This time last year there were 238,000 SMEs in Ireland, employing more than 1.3 million people out of a total workforce of 2.3 million.
The coronavirus pandemic had had a devastating impact on the economy and for microenterprises there was a need for early assistance “with a particular focus on liquidity” to assist firms to reopen once restrictions were eventually relaxed.
Mr Varadkar said that in the July stimulus package they were looking at a range of possible actions, including an enhanced restart grant to help businesses that are reopening; lower cost long-term loans; reductions in business taxes; and extending the wage subsidy scheme.
The package, aimed at stimulating the post-low-down economy “will have a particular focus on sectors which employ large numbers of younger people, such as hospitality, retail, tourism and leisure”.
He said the schemes funded through the European Investment Fund would include projects that facilitate business investment in climate action.