Microfinance Ireland, which provides funding for businesses with less than 10 employees and annual turnover of less than €2m, has reported that applications in 2017 rose by 9% and that €4.9m in loans was drawn down by 358 businesses.

In the first quarter of 2018, a total of €1.3m in loans was drawn down. However, with €12.7m cash on its December 2017 balance sheet,  MFI acknowledges “a backdrop of suppressed credit demand by micro-enterprises, thus reducing overall gross demand".

MFI’s lending activity operates via the Local Enterprise Office network and a direct channel. The interest rate charged to borrowers sourced through LEOs is 6.8% APR, and 7.8% APR if loans are applied for directly.

Microfinance Ireland is funded by loan finance from the banks and grant funding from the Exchequer. The organisation is paying back €10m drawn down from the banks through the Social Finance Foundation, with €1.4m repaid through 2017. MFI has an option to draw down a further €5m before the end of 2018.

To date the organisation has received €20m in state funding, including €10m drawn down in January 2017.

In Association with

Microfinance Ireland was established as a source of loan capital for micro firms refused credit by banks, though a bank decline is no longer a prerequisite for applying for an MFI loan. Unlike the banks, Microfinance Ireland does not demand personal guarantees.

Lending Record

The company’s accounts for 2017 reveal €19m loans advanced since inception. Loan repayments have totalled €7.8m and €3.1m of defaulted loans has been written off. Of the end 2017 loan book of €8.2m, the accounts categorise €2.5m as problematic in terms of borrowers meeting their repayment terms.

MFI, led by CEO Garrett Stokes (pictured), reports that following a positive first quarter in 2017, lending growth slowed in Q2 and Q3, though there was solid growth in Q4, resulting in a record number of applications for the year. Despite approval rates being marginally lower in 2017 (43% v 44% in 2016), the number and value of loans approved increased. The average size of loan approved was €14,400. Four in five MFI loans went to borrowers outside Dublin.

Business minister Heather Humphreys commented: “Since its launch in 2012, Microfinance Ireland has provided vital support for micro-enterprises throughout the country. 2017 has been a record year, with lending activity and the number of jobs supported continuing to grow."