03 Nov 2017 | 11.45 am
Microfinance Ireland: Funding Sustainable Success
Setting up a business among the most exciting and challenging things one can do
03 Nov 2017 | 11.45 am
As the not-for-profit lender Microfinance Ireland celebrates its fifth anniversary in operation, the credit environment for Irish startups and young businesses has become increasingly positive, though not without its share of difficulties
When MFI was established in 2012, banks were not lending and small businesses were finding it very hard to get much-needed financial support. While banks are lending again, there is still a significant demand for microfinance loans.
Set up under the Government’s Action Plan for Jobs, MFI embarked on providing loan finance to small businesses that were experiencing difficulty in securing funding from traditional sources. The majority of MFI borrowers are sole traders and micro-enterprises with fewer than three employees. In the last five years, MFI has approved approximately €18.5m in loans to almost 1,300 borrowers, supporting over 3,000 jobs. Microfinance Ireland’s aim is to ensure that sustainable businesses receive finance to support entrepreneurship and to create jobs.
MFI lends amounts from €2,000 up to €25,000, either for set-up costs, working capital or business expansion. The interest rate, which is fixed, is 7.8% APR, and reduced to 6.8% APR if the borrower submits their application through one of their partners. Local Enterprise Offices, Local Development Companies and banks all refer applicants to MFI.
Unlike banks, MFI does not demand a personal guarantee from applicants, though it does request a non-recourse indemnity. Most important to the lender is getting to know the person behind the application, and knuckling down to understand the viability of the business.
Unfortunately, there are some people whose idea you know is not going to work, but thankfully we come across many strong proposals that with support will lead to a viable and sustainable business. MFI borrowers are also offered valuable support from experienced mentors through their Local Enterprise Office to help them to establish, grow and develop their business.
Pinpointing the problem areas or pressure points of any business at the outset is key to success in the long run. MFI want to help people to get into business with their eyes open. Setting up a business is probably the most exciting thing anyone will do – but it’s also the hardest thing they will ever do.
MFI has recently been recognised as one of the top micro-credit providers in Europe, having been awarded with a Certificate of Compliance for the European Code of Good Conduct for Microcredit Provision by the European Commission. The code measures a set of standards in terms of customer and investor relations, governance, credit and risk management, reporting and management information systems common in the microcredit sector in the European Union.
As one of four organisations in Europe to have achieved the award (and the only company in Ireland), MFI is understandably delighted with its achievement. These standards are for the benefit of our customers, the Irish government who fund us, our regulators and partner organisations. We plan that over next five years we will maintain these high standards and provide colour for Ireland’s entrepreneurial landscape.
+ For more more information on Microfinance Ireland:
Phone: 01 2601 007
Photo: MFI client Tommy Linehan and his team from Foot Solutions, Cork