Trend of Corporate Bad Debts due to Rising Interest Rates and Assistance for SMEs to Access Capital for Growth

Mr Desmond Choo asked the Prime Minister in view of higher interest rates (a) whether there has been an increase in corporate bad debts; and (b) how does the Monetary Authority of Singapore ensure that SMEs continue to have access to capital to grow their businesses.

Mr Speaker, the corporate sector has thus far managed the rise in interest rates well. Corporate revenue has continued to grow. The proportion of non-performing loans (NPL) for the corporate sector has, in fact, fallen over the past year – from 3.1% in June 2021 to 2.5% in June 2022, based on latest available data. The NPL ratio within the SME segment also fell from 2.8% to 2.4% over the same period. NPL has fallen in the corporate sector and also in the SME segment.

SME loan volumes themselves have, indeed, remained resilient over the past year, even as interest rates gradually rose. SME loan volumes expanded by 11.5% on a year-on-year basis in August 2022, compared to the broader corporate loan growth of 7.2%.

As Senior Minister of State Chee Hong Tat recently explained to this House on 4 October 2022, the Government helps businesses access capital to help grow their businesses through various credit schemes. We will continue to monitor developments in this space.

I thank the Minister of State for his answer. I have two supplementary questions. The first one is, as we expect the overall interest rate environment to only increase and the cost of funds for companies to increase rather steeply both here and in the region, what is the forecast on NPLs, especially for the SMEs? My second clarification is, if and when we see a large number of companies facing insolvency, under what circumstances will the Government come in and assist such companies, especially the promising ones, to tide over a difficult period?

I thank the Member for his supplementary questions. What is quite useful is to look at the corporate balance sheets, the health of the corporate balance sheets. Maybe I will just share a few useful data points.

The first is that most Singapore-listed firms continue to hold sufficient liquidity as of the first half of 2022 and these are liquid assets, such as cash and cash equivalents, that are exceeding their short-term liabilities.

And MAS has conducted stress tests on these balance sheets of SGX-listed firms which show that most corporates will be resilient to further interest rate increases and earnings shocks. In the unlisted sector itself, most firms also either have healthy debt servicing ability or sufficient cash holdings to cover the short-term financing or operational needs, but MAS and the Government will monitor this very closely and adjust where necessary.

With regard to the second supplementary question, I mentioned earlier on that Senior Minister of State Chee Hong Tat had shared how the Government is also availing access to financing to the corporate sector as well as SMEs. Some of these include Enterprise Singapore's Enterprise Financing Scheme which help businesses access and tap into funding and also co-sharing loan default risks.

SMEs can also tap on a variety of schemes, such as the Productivity Solutions Grant, Energy Efficiency Grant and SkillsFuture Subsidy, to help them transform their businesses in light of many different challenges afoot. In fact, NTUC's new Company Training Committee grant also helps SMEs to improve productivity as well as the quality of their workforce.