Microenterprise Loan Fund
The Microenterprise Loan Fund Act 2012 provides for the establishment of a Microenterprise Loan Fund and provides for the formation of a private company to lend to microenterprise and to manage the Fund. The Fund is designed to stimulate lending to sustainable micro-enterprises and is targeted at start-up, newly established, or growing micro-enterprises across all industry sectors, employing not more than 10 people. The company will be empowered to provide loans of up to €25,000 for commercially viable proposals that do not meet the conventional risk criteria applied by commercial banks.
The 2012 Act empowers the Minister for Jobs, Enterprise and Innovation, to give €10 million of exchequer money to the company for the purpose of lending to microenterprises; to make a Scheme which may make provision for various terms and conditions such as purposes for which the loan may be given, terms of the loan agreements, reports and information by the subsidiary to the Minister, audit and examination of accounts of the subsidiary, and other matters.
The costs associated with administering the Act will be subject to sanction from the Minister for Finance, with the consent of the Minister for Public Expenditure and Reform, and will be met from moneys provided by the Oireachtas.
Composition and Application
The Microenterprise Loan Fund consists of all grants made to the subsidiary all gift and other income. The Minister may to pay to the subsidiary €10 million., There is scope for additional Exchequer funding if deemed necessary subject to an absolute cap of €25m before further Oireachtas approval is required.
The subsidiary may invest money from the fund, and to vary or sell investments made. The subsidiary to lend money to microenterprises using moneys standing to the credit of the Fund and money borrowed from SFF.
The Act provides for the funding of the subsidiary out of moneys in the Fund, and allows the Minister to make an arrangement related to the expenditure generally incurred by the subsidiary in the performance of its functions under the Act.
The equity that Microfinance Ireland (MFI) can receive was capped €25 million. A 2019 amendment increased this funding by €10 million (from €15 million to €25 million) to a total of €35 million. This will provide a further €10 million to enable MFI to provide increased lending in the event of a disorderly Brexit.
The objective of the Microenterprise Loan Fund (Amendment) Act 2020 was is to make certain amendments to both the Microenterprise Loan Fund Act 2012 (as amended) and the European Investment Fund Agreement Act 2018 in order to support the needs of businesses to access additional finance as a result of the Covid-19 crisis.
It increases the overall amount that the Minister can grant to MFI by €70m, from the current total cap of €35m to a new cap of €105m.
MFI may allow lend to microenterprises out of money that it has borrowed from persons (sources) other than from the Social Finance Foundation. It removes the restriction on the subsidiary (Microfinance Ireland – MFI) from borrowing on its own behalf. It gives the power to MFI to borrow moneys from persons other than the Social Finance Foundation, i.e. from promotional financial institutions.
The Minister (with the consent of the Minister for Public Expenditure and Reform) may make an arrangement in writing with MFI in relation to expenditure of moneys by MFI in the performance of its functions under the Act, such as the payment of salaries of MFI staff. A similar restriction is necessary as regards money that MFI will pay to other persons on foot of borrowings made under the new power.
The 2020 Act increased the maximum cumulative contribution that can be committed by the Minister for Business, Enterprise and Innovation or the Minister for Agriculture, Food and the Marine (with the consent of the Minister for Finance and the Minister for Public Enterprise and Reform) to the European Investment Fund from the current limit of €75 million to €500 million.
This allows the two Ministers to make use of additional funding available from the European Investment Fund in response to the Covid-19 crisis to increase the size of the Future Growth Loan Scheme and to develop other schemes for Irish enterprises.
The Industrial Development (Amendment) Act 2019 afforded lending powers to Enterprise Ireland. It made other provisions related to support for research, development and innovation (RDI) in several critical sectors.
The Industrial Development (Amendment) Act 2019 permitted Enterprise Ireland to lend, participate in certain types of follow-on investments. Government approval is required for investment amounts or loans in excess of €7.5 million for any client. Providing Enterprise Ireland with the powers to facilitate additional lending/investment instruments in certain circumstances, increases the flexibility to support enterprise development and to manage its investments on a par with private sector investors. Such additional powers will help to preserve the value of the State’s investments in these businesses and will assist companies through restructuring or re-development programmes.