SMEs' Access to Foreign Exchange Hedging Products

Mr Yee Jenn Jong asked the Prime Minister whether the Ministry is working with banks to improve SMEs' access to foreign exchange hedging products, including renminbi hedging.

The Minister for Culture, Community and Youth and Second Minister for Communications and Information (Mr Lawrence Wong)(for the Prime Minister) : Mdm Speaker, I am taking this Question on behalf of the Deputy Prime Minister and Chairman of the Monetary Authority of Singapore (MAS).

Madam, banks in Singapore offer companies, including small and medium enterprises (SMEs), a comprehensive range of foreign exchange solutions. These include foreign exchange forwards, swaps and options against various currencies, including the reminbi (RMB). These hedging solutions are offered for transaction sizes as small as $10,000, which should cater to the needs of most SMEs. SMEs can also choose to hedge their Asian currency risks through the many currency futures contracts listed on the Singapore Exchange (SGX).

To reach out to the SMEs, several banks have organised workshops on the use of these foreign exchange (FX) hedging tools. Besides the banks, SGX and the Association of Small and Medium Enterprises (ASME) have organised seminars on the use of FX futures to hedge risk. SPRING also provides toolkits and grants to help SMEs upgrade their capabilities in financial management or improve financial knowledge. To reach out to more SMEs, SPRING is intensifying its outreach efforts through a network of 12 SME centres. MAS, on its part, will continue to ensure that the finance industry meets the needs of our SME sector.

I thank the Minister for the reply. Just a supplementary question. I would like to check if our Government agencies have conducted studies on how Singapore's hedging product market compares to those in other countries and also, especially on the usage by our companies. Have studies been conducted to see whether, for example, our SMEs are using this appropriately and sufficiently?

Madam, I can speak from the perspective of the MAS because we engage the banks and the finance sector and I would say that the banks are seeing greater demand for foreign exchange services and solutions from the SMEs. Because our SMEs are growing and there are also more of them going overseas, they are earning international revenue and, therefore, they have more foreign exchange exposure. So, if you talk to the banks, all of them are, indeed, expanding their suite of solutions and services to meet their small business customers, particularly with regard to managing foreign exchange transactions and risks.

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However, I would also say that when we look at the assessment from the financial sector's point of view, a lot of the gap is really in terms of the knowledge and the in-house skills within the SMEs. It is not so much the lack of services but the issue of a lack of knowledge and in-house skills within the SMEs and that means really going out to reach out to the SMEs, providing more courses or helping them to understand how to even quantify their FX exposure, to begin with, and then helping them to understand what are the different options out there in order for them to hedge their FX risks, whether it is through a bank solution, whether it is through a futures contract or, for that matter, through a natural hedge, because you do it in a low-cost manner through a natural hedge by holding a basket of foreign exchange currencies. There are different solutions and I think that is the biggest gap that I think we need to address. As I have said earlier, there are many agencies – SPRING, ASME as well as the banks and SGX – offering different workshops and courses to SMEs to help them raise their awareness level.