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The Credit Guarantee Scheme aims to provide much-needed credit to job-creating SMEs who currently struggle to get finance from the banks. It is intended to address market failure affecting commercially viable businesses in two specific situations—namely, where businesses have insufficient collateral, and where businesses operate in sectors with which the banks are not familiar. It provides a 75% State guarantee to banks against losses on qualifying loans to firms with growth and job creation potential.

Initially, the scheme will facilitate up to €150m of additional lending per annum to SMEs, in addition to the lending targets set for the pillar banks. The Scheme will be demand-led, and take-up and performance will be closely monitored.

For every €150million of additional lending, the Scheme is expected to benefit over 1800 businesses and create over 1300 jobs. The cost of the Scheme per €150million of lending is €6.38million. However this does not take into account benefits to the exchequer this lending will bring in terms of increased tax receipts and decreased social welfare payments. When these benefits are taken into account, the net gain to the Exchequer is over €25million per €150million of lending, representing a 400% return on the State's investment.

Among the Q3 measures delivered under the Action Plan for Jobs 2012, the Government:

· Launched the Microfinance Fund which has been open for business since October 1^st 2012. The Fund will provide for loans of up to €25,000 for viable businesses with less than 10 employees who have had difficulty accessing credit from the banking sector. Up to €40 million in additional lending will come from the fund in the next 5 years. The scheme can be extended to provide an additional €50 million over the following 5 years.

· Established new Technology Centres in Cloud Computing, Learning Technologies and Financial Services. These are collaborative entities established and led by industry, focused on research with a direct impact on industry.

· Enacted legislation that will ensure procedurally-robust wage setting mechanisms.

· Launched Smart Futures, a science, technology, engineering and maths (STEM) careers partnership between ICT Ireland, the Irish Medical Devices Association, Engineer's Ireland (STEPS) and SFI/Discover Science and Engineering.

The Taoiseach said: "Getting Ireland working again remains the top priority of the Government and in the Action Plan for Jobs we have an essential tool in building the new economy. Through the Action Plan we will add to the growing trend of private sector job creation which builds on the 17,000 private sector jobs created since March 2011. All actions scheduled for delivery in the first and second quarter of 2012 have been successfully delivered and 58 out of 67 measures scheduled for the third quarter have been implemented. The focus now is to get all remaining measures delivered before the end of the year.

"I am delighted that the Credit Guarantee Scheme is being launched this morning. The Government recognises that the small business sector will be essential to our mission of getting Ireland working again. Alongside the recently launched Microfinance Scheme, the work through the Credit Review Office and directly with the Banks, the Scheme is part of the suite of measures the Government is undertaking to improve access to finance for small businesses."

The Tánaiste said: "Promoting growth and job creation remains our biggest challenge as a country and as a Government. We must continue to pursue a wide range of strategies to ensure that we create the right environment for job creation. I welcome the achievement of 87% of the Action Plan for Jobs measures due in Q3 of 2012. We must continue to push hard, across the system, to realise the entirety of this Action Plan on Jobs.

"Today's launch of the Credit Guarantee Scheme is another important step forward. It is part of our broader strategy to provide credit to business and recognises the central importance of the small business sector to Ireland's continued recovery."

The Minister for Jobs, Enterprise and Innovation said: "The Irish economy is currently in transition, and the Government's plan is aimed at supporting that process, creating a powerful engine of indigenous enterprise and rebuilding an economy based on enterprise, exports and innovation. Through continued strong implementation of the plan we are determined to ensure that we can continue to see positive news like the recent investments, supported by my Department, by companies like EA Games, Northern Trust, Kerry Group and Stiefel.

"Access to credit remains a key issue for many businesses, and if we are to see the growth and jobs we need, Government must to act to fill gaps where specific market failures exist. Through the Action Plan for Jobs, we are delivering in 2012 a number of measures to fill these gaps and ensure that businesses do not face unnecessary obstacles as they attempt to expand and create the jobs we so badly need, including the €90million Microfinance Scheme, the €120million second call under Innovation Fund Ireland and the €150million Development Capital Scheme.

"The Credit Guarantee Scheme will benefit innovative, job-creating businesses that face obstacles accessing credit because they do not have enough collateral, or because they operate in sectors which the banks are not familiar with. These are the businesses we need to stimulate our jobs recovery, and with new supports like the Credit Guarantee Scheme I am determined to ensure that they can expand and create the employment we need".

Credit Guarantee Scheme
The Scheme will facilitate up to €150 million of additional lending to eligible SMEs lending per annum. The purpose of the scheme is to encourage additional lending to SMEs, not to substitute for conventional lending that will otherwise have taken place.

The Scheme is intended to address two distinct barriers to lending; inadequacy of collateral (Pillar 1) and inadequacy of understanding of the novelty of a business model, market, sector or technology (Pillar 2). It will be exclusively targeted to address these particular market inefficiencies. Commercially viable, well performing micro, small and medium enterprises that have a solid business plan and a defined market for their products or services, thereby demonstrating their ability to repay the loan, are the target of the scheme.

Eligible Loans
Term loans, other instruments with term loan-like structures and performance bonds will be covered by the Scheme. The minimum permissible loan value will be €10,000 and the maximum will be €1,000,000. Use of the Scheme is focussed on facilitating additional new lending, with refinancing of existing debt explicitly excluded.

The individual loan transaction between Lender and Borrower is delivered in an almost identical fashion to any other comparable commercial lending transaction between the parties, with the only difference being the supplementary arrangements necessary for payment of the 2% premium.

Participating Lenders—Initially, Bank of Ireland, Allied Irish Bank and Ulster Bank will participate, however the Scheme will be open to other lenders, subject to an accreditation process.

How to apply—Applications for credit should be made to the participating banks in the usual way. The lender will assess the application. In the event that the lender determines that the application is viable but not approved because of insufficient security or higher risk in the case of a growth/expansionary SME, the lender will then determine eligibility under the Scheme. In the event that an SME has an application for credit refused by one of the participating lenders, the customer can request the bank to consider the application under the Credit Guarantee Scheme.

Interest Rate - The interest rate charged and any other fees and charges applied to the facility are a commercial matter for the Lender. Their decision is based on their own assessment of the risks.

Portfolio Approach - The State will enter into an agreement with each Lender and will accredit the Lender to participate. The guarantee will be given to each lender for a collection of loans (a portfolio approach) rather than individually (loan-by-loan basis). The choice of loans which make up the portfolio is at the discretion of the lender, provided the borrowers meet the eligibility criteria.

An annual portfolio claim limit of 10% will be set for the aggregate value of loans for each lender, thereby capping the State's exposure. Once a Lender's default claims have reached their portfolio claim limit of 10%, any further losses must be borne by the Lender and will not be eligible to be reclaimed from the State.

Eligibility of borrower—Decision making on commercial viability of the SME and all credit assessments will be fully devolved to the participating lenders. The baseline for determining commercial viability within the Scheme should be no different from the standard viability test applied by each Lender within their normal commercial SME lending procedures.

The Guarantee - The Guarantee rate will be 75%.
· Combined with other variables this will deliver an overall risk share of approx. 50:50 between State and Banks over lifetime of Scheme. In that way, both parties (Lender and Guarantor) are demonstrating a joint commitment to addressing market inefficiencies with regard to meeting the borrowing requirements of Irish SMEs.

· Identical to rate available to Northern Ireland Banks participating in UK Guarantee scheme.

· The period for which the Guarantee is provided (as distinct from the term of the loan) is 3 years.

The Scheme provides a Government guarantee to the lender of 75% on individual loans to viable businesses, which is paid to the lender on the unrecovered outstanding balance on a loan in the event of an SME defaulting on the loan repayments. Payment of the outstanding balance is calculated only on the principal of monies borrowed, and not on interest in respect of the loan.

The guarantee provides protection to the Lender in the event of default by the borrower—it is not insurance for the borrower in the event of their inability to repay the facility.

Premium Charge - The State Aid framework sets the requirement that a premium must be charged to the Borrower iin return for the State guarantee. Recipient businesses will be required to pay the Minister (the Guarantor) an annual premium of 2% on the outstanding balance of the loan, assessed and collected annually or quarterly in advance.

Operator of the Scheme - Following a public tendering process, Maynooth based company, Capita Asset Services were selected to manage and operate the Scheme.

Exclusions
· Primary production in agriculture, horticulture and fisheries are excluded from the scope of the scheme in the light of particular restrictions under the De Minimis State Aid rules and because the specific market failures identified do not apply to a significant extent in these sectors. The food and drinks sectors will be eligible for the Scheme.

· Refinancing of existing debts will be excluded as the purpose of this Scheme is to facilitate additional lending into the economy. Such arrangements will continue to be dealt with by banks under their current lending arrangements. However in cases where new lending is sought along with refinancing, the availability of a guarantee in respect of the new lending element should be of assistance in providing an overall package of support to the business, including consolidation of existing debts.

Cost
- The net cost will be met from the Department of Jobs, Enterprise and Innovation vote. The net cost for an annual portfolio of €150 million of guaranteed lending is approximately €6.38 million.

Benefits - The benefits forecast to arise from this intervention in each year of operation,
on the basis of each tranche of €150m of additional lending to SMEs, include:

• Over €25m of exchequer benefits in tax revenues and welfare cost savings, giving a 400% return on State investment.

By obtaining a guaranteed loan, SMEs are thus enabled to develop a positive track record with the lender with the objective of returning to standard commercial credit facilities in time. It will also place Irish SMEs on a competitive level-footing relative to other trading competitors, who often avail of a guarantee in their own countries.

It is widely recognised that the benefits from small business growth accrue more widely than just to the individual company who has accessed the credit through the Guarantee Scheme. There are positive spill over effects into other businesses, activities, and to society as a whole.

For the Lender, the successful performance of the guaranteed lending helps develop experience of and confidence in undertaking that type of lending and provides evidence to inform the refinement of policies in respect of lending in cases of inadequate security or to novel propositions which may otherwise be outside the Lender's existing risk appetite and parameters.

This is the third report of the Monitoring Committee established by Government to monitor and drive implementation of the measures contained in the Action Plan for Jobs 2012. As with the previous two reports it outlines progress made on measures due for completion in the preceding quarter, Quarter 3 (Q3) of 2012, but for the first time includes an update on measures described in the Plan as "ongoing in 2012."

The Action Plan, which was published by Government in February this year, provides a comprehensive framework for actions right across Government and the public sector to support economic growth and job creation. To deliver on this, the Plan outlines more than 270 actions to be undertaken in 2012. Each of the associated measures specifies the Government Department or Agency responsible for implementation, and the quarterly deadline in 2012 by which they will be delivered.

In order to drive implementation of the measures, the Government established a Monitoring Committee which comprises representatives of the Department of the Taoiseach, the Department of Jobs, Enterprise and Innovation, the Department of Public Expenditure and Reform, and Forfás.

Ireland has suffered an enormous dislocation of employment as a result of the crisis. In the three years prior to the Government taking office, over 300,000 jobs were lost, and addressing the employment crisis is the Government's top priority. The continuing scale of the challenge is evident from the most recent data which shows that, on a seasonally adjusted basis, employment fell by 13,700 (-0.8%) in the second quarter of 2012. This follows on from a seasonally adjusted decrease in employment of 10,300 (-0.6%) in Q1 2012. The number of people currently in employment stands at 1,787,900.

Jobs continue to be lost in construction and domestic financial services, as well as in the public sector, with employment falling by 21,000 and 9,000 in the public and construction sectors respectively between March 2011 and June 2012. However, employment has started to grow in more sustainable sectors since March 2011, including tourism-related activities (+10,500) and ICT (+5,500). Employment in IDA-supported companies has increased by approximately 9,000 in net terms since the start of 2011, while employment in Enterprise Ireland supported companies increased in 2011 following a four-year period in which 30,000 jobs were lost. Exports by Enterprise Ireland supported companies reached their highest-ever level in 2011.

The Action Plan for Jobs 2012 is the first instalment in an ambitious multi-year process which aims by 2016 to create the environment where the number of people at work will increase by 100,000 net—to 1.9 million—and reach 2 million people by 2020. Overall, the success of the Plan will depend on whether it fosters greater job retention and creation.

In the third quarter of 2012, Departments and agencies were to deliver 67 measures relating to 57 of the Action Plan's 270 actions. 58 of the 67 of the measures due in Q3 of 2012 have been delivered on schedule, giving a completion rate of 87%.

In delivering 58 measures in the third quarter of 2012, the Government has, for example:

§ Established new Technology Centres in Cloud Computing, Learning Technologies and Financial Services. These are collaborative entities established and led by industry, focused on research with a direct impact on industry. Action 1.4.

§ Enacted legislation that will ensure procedurally-robust wage setting mechanisms. Action 1.12.

§ Launched Smart Futures, a science, technology, engineering and maths (STEM) careers partnership between ICT Ireland, the Irish Medical Devices Association, Engineer's Ireland (STEPS) and SFI/Discover Science and Engineering. Action 1.37.

§ Launched the Microfinance Fund which has been open for business since October 1^st 2012. The Fund will provide for loans of up to €25,000 for viable businesses with less than 10 employees who have had difficulty accessing credit from the banking sector. Up to €40 million in additional lending will come from the fund in the next 5 years. The scheme can be extended to provide an additional €50 million over the following 5 years. Action 2.3.

§ Launched the first programme of Management Works in Dublin, where firms are focused on management team development. Additional programmes in Galway, Cork, Waterford, Clare and Dublin will commence in October. Action 3.19.

§ Organised regional food showcases in the BMW region, South East and South West regions where over 120 enterprises are matched with potential buyers and producers in the locality and help stimulate the creation of local jobs. Action 7.4.1.

Nine measures outlined in the Plan for completion in Q3 have not been delivered on schedule. These are:

§ Implement revised legislation to permit SFI to fund 'applied research' (revision to Industrial Development Act (SFI) 2003). Action 1.3.

§ Place downward pressure on insurance costs and the cost of legal services via enactment of the Legal Services Bill. Action 1.16.

§ Introduce a systematic approach to the national surveying of undergraduate and postgraduate students and employers to inform institutional and programme management and development. Action 1.38.

§ Publish legislation to integrate the foreshore consent process under the Foreshores Acts 1933 with the existing on‐land planning system. Action 1.47.

§ Enact legislation to give effect to the new structure of employment rights institutions. Action 1.48.

§ Publish legislation to improve the legal environment to set up and operate a business (Consolidated Companies Bill). Action 2.13.

§ Assess applications and recommend allocations to the Minister under a new round of the Sports Capital Programme. Action 6.10c.

§ Make allocations under the new round of the Sports Capital Programme and inform successful and unsuccessful applicants. Action 6.10d.

§ Introduce a Voluntary Code of Conduct on Payments within the private sector, with the aim of reducing payments terms from the current average of 70 days. Action 7.13.2.

A further measure has not been delivered as set out in the Plan for Q3 but has been replaced with another job-supporting measure:

§ Issue to persons who are over one year unemployed a certificate to present to employers of eligibility for Revenue Job Assist. Action 3.45.

The completion rate of 87% in Q3 follows on the 96% completion rate seen in Q1, and 94% in Q2. This deterioration in delivery is due in part to delays in the publication and progression of legislation in the last quarter. Whereas in the first two quarters of the year delayed actions were subsequently delivered within a relative short timeframe, this will not be possible to the same extent with legislative delays. This issue will therefore likely persist and impact on measures due in Q4 also.

All 160 measures that fell due in the first six-month period have now been delivered in full. This includes the five outstanding measures from the second quarter: accelerate the programme of revaluation of commercial premises, which will provide a basis for an adjustment in the burden of commercial rates, (Action 1.17); submit proposals for Government decision on a new national waste policy, (Action 1.22); building on the work of the Next Generation Broadband Taskforce, agree advanced broadband targets and milestones for Ireland, identify the infrastructure deficits nationally and then develop and implement a plan to achieve these targets, (Action 1.45); following establishment of the Microfinance Fund facility (i) apply to European Investment Fund (EIF) for a guarantee facility and (ii) complete a due diligence process with the EIF, (Action 2.3).

As noted above, this Third Progress Report for the first time includes an update on the 92 measures described in the Plan as "ongoing in 2012". Although not specifically due in the last quarter (or any specific Quarter), Departments and Agencies with responsibility for actions listed as "ongoing in 2012" have signalled progress on them to the Monitoring Committee for this report.

In progressing measures described in the Action Plan for Jobs as "ongoing in 2012", already this year the Government has, for example:

§ Placed downward pressure on commercial rents in respect of which NAMA has acquired the loan on the underlying property. Since the start of the year, NAMA has approved cumulative rent reductions through debtors/receivers of over €6 million. Action 1.24.

§ Brought down the cost acquiring commercial property by reducing the Stamp Duty rate from 6% to 2% and the introduction of a Capital Gains Tax incentive for property purchased up to the end of 2013 and held for at least seven years. Action 1.25.

§ Provided bonus points for students taking leaving certificate higher level mathematics from 2012. Action 1.36.

§ Through its Discover Science and Engineering programme, promoted the study of the physical sciences to students. Action 1.37.

§ Fostered greater alignment between the Further Education and Training sector and the labour market. Action 1.39.

§ Invested over €1.5 billion of exchequer capital to ensure Ireland's infrastructure can facilitate economic growth, including capital investment for direct enterprise support and development. Action 1.41.

§ Secured 159 significant (over €500,000) investments by Enterprise Ireland assisted firms in a range of areas which are critical to company growth and job creation. Action 3.1.

§ Undertaken ten major sector-specific Trade Missions and market evaluation Missions that reflect the priority markets identified in the Trade Strategy as well as firms' interest and stage of development. Action 3.12.

§ Assisted Irish companies in winning 540 significant brand new customers across almost 50 countries. Action 3.13.

§ Cascaded Management Development learnings to a wider number of companies, with over 120 participant companies on significant management programmes, and over 460 on short-course management development programmes. Action 3.20.

§ Established a Manufacturing Development Forum to assist the Government in identifying the needs of manufacturing enterprises and to progress a transformation agenda in this area. Action 7.1.2.

§ Implemented the Action Plan on ICT Skills to address the skills needs of ICT and related sectors, with currently more than 600 participants on the Level 8 ICT Skills Conversion programmes that have been rolling out since March 2012, and more than 1,300 people now due to graduate from ICT courses provided under the first phase of Springboard. Action 7.5.1.

One of the "ongoing in 2012" measures—marketing the Infrastructure Fund to Irish investors, Action 1.42—is currently delayed.

The Action Plan for Jobs is a rolling plan and, above all, a plan that will be judged on its results and impacts. In this context, some early stage impacts, linked to the implementation of measures in Quarters 1 and 2 aimed at enhancing the operating environment for firms, are now being seen. For example:

§ In the first six months of this year, investments by 44 multinationals in Ireland were announced with associated jobs for Dublin, Limerick, Mayo, Sligo, Cork, Louth and Kildare (Action 5.1).

§ In the first six months of the year, 53 new High Potential Start-Up (HPSU) companies were supported by Enterprise Ireland that together plan to create over 900 new jobs by the end of 2014. Both the number of investments and the number of jobs to be created are significantly up on the same period last year.

§ Over 280 employers have been awarded Employer PRSI exemptions in respect of over 635 employees in the first six months of 2012 (Action 1.13).

§ There have been tens of thousands of visits to the ConnectIreland website, under the Government's Succeed in Ireland jobs finder's fee scheme. "Connectors" have submitted 349 company names. Project activities range from software to professional services and from engineering to business support. Employment potential is generally in the range of 10-50 people. One project has already been announced—Intergeo Services is to establish its EMEA Headquarters in Carlow, with the potential for 30 skilled jobs (Action 5.6).

§ More than 6,000 additional free part-time higher education places for unemployed people have been rolled-out under the latest Springboard call. The places are available free of charge to unemployed people on 220 different courses in 36 public and private higher education providers across the country. The courses address the skills needs of key growth sectors of the economy, such as ICT, international financial services, medical devices and the green economy. Courses that address cross-sectoral enterprise and generic skills needs are also available. Over 60% of courses include a work placement element (Action 1.34). More than 1,300 people have graduated from ICT courses provided under the first phase of Springboard 2011. A further 2,200 places on ICT programmes from Certificate to Masters Degree level have been made available under Springboard 2012. (Action 1.35).

§ In May 2012 the JobBridge Scheme was extended providing an additional 1,000 places and widening the eligibility criteria to include recipients of One Parent Family or Disability Allowance. Up to Q2 2012, 1,310 interns who completed their JobBridge placement progressed directly into employment on immediate completion of their internship. This represents 37% of all JobBridge finishers to-date and compares favourably with European averages in this area. In excess of 6,000 companies have participated in the scheme to date (Action 1.35).

§ The successful buyer forum, Marketplace 2012, involving 176 Irish companies and 500 international buyers, has by end June achieved sales contracts of €5 million. The target is to exceed the sales contracts of €8 million and €11 million achieved in the two previous Marketplace events.

§ There continues to be a significant number of enquiries from potential applicants and their representatives for the Immigrant Investor and the Start-up Entrepreneur visa programmes. To date, one application for the Immigrant Investor Programme has been received as well as eleven applications for the Start-up Entrepreneur Programme. One application under the Immigrant Investor Programme has recently been approved, as have two applications under the Start-up Entrepreneur Programme on foot of recommendations from the Evaluation Committee (Action 4.7).

§ Irish firms have signed multi-million euro contracts with international customers, made international acquisitions, and launched new products, while education institutes have agreed memoranda of understanding with numerous universities overseas on foot of trade missions undertaken in the first six months of 2012 to the US, China, Finland, Sweden, Turkey, UK and Russia (Action 3.12).

§ The National Procurement Service has an ongoing campaign to encourage registration by SMEs on the eTenders website. Since the start of the year, New Supplier Registrations on eTenders exceeded 18,000. When the new eTenders system is operational, companies that register will be required to provide information in relation to employee numbers, thereby facilitating reporting in relation to supplier registrations by size of company (Action 3.52).

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