Microfinance Ireland, a company that provides finance to small businesses, has signed a guarantee agreement with the European Investment Fund (EIF) aimed at supporting microenterprise and self employed entrepreneurs in Ireland.

The company was launched in September 2012 as part of the Action Plan for Jobs scheme and provides loans of up to €25,000 for small businesses that have limited access to commercial financing.

The EIF will manage the guarantee under its Progress Microfinance initiative, which enables selected credit providers in the EU to increase lending.

Chief executive Richard Pelly believes the agreement will assist small businesses during their crucial growth phase.

"We are pleased to be signing this agreement in Ireland with Microfinance Ireland and to partner with the Government and banks in scaling up support for microenterprises across the country," he said.

The scheme targets small businesses with less than ten employees and a turnover of less than €2 million. It hopes to assist 5,000 enterprises over the next ten years, creating an estimated 7,700 jobs.

Minister for Research and Innovation, Sean Sherlock, said: "Obtaining support through the guarantee will greatly assist Microfinance Ireland in providing much needed credit to the micro enterprise sector and the creation of new jobs."