Help for Singapore Companies as Banks' Loan-loss Provisions Rise

Mr Teo Siong Seng asked the Minister for Trade and Industry in light of rating agency Moody's reports in early July 2014 indicating that Singapore banks are expected to have higher loan-loss provisions which may lead to a more conservative approach in loans being given to companies, especially SMEs, whether the Ministry can look into helping businesses in the area of financing.

The Singapore banking system remains healthy and has continued to provide credit to the corporate sector. Moody's has continued to assign Singapore banks the highest average ratings compared to all banking systems globally. Bank loans to businesses grew by 16% year-on-year as at June 2014, from S$316 billion to S$367 billion.

The 2013 Annual Small- and Medium Enterprise (SME) Development Survey by the DP Information Group found that financing was not a major issue for most businesses. The proportion of SMEs which reported financing challenges in the survey has been on a declining trend, from 38% in 2010 to 17% in 2013.

The Government has a comprehensive suite of schemes to help businesses with their financing needs. To support businesses with their domestic financing needs, SPRING offers the Local Enterprise Finance Scheme (LEFS), which provides secured loans for businesses for the purchase of factory and equipment, as well as the Micro Loan Programme (MLP), which provides unsecured working capital loans for micro-enterprises. To support businesses with their internationalisation financing needs, IE Singapore offers the Internationalisation Finance Scheme (IFS), which provides businesses with financing for their secured overseas ventures, as well as the Trade Credit Insurance Scheme (TCIS), which provides insurance for businesses to protect against non-payment by overseas buyers.

The Government regularly reviews these schemes to ensure that businesses have adequate access to financing. In Budget 2014, the MLP was enhanced to increase the Government's risk-share of MLP loans to young enterprises of less than three years from 50% to 70%, in response to industry feedback that banks were reluctant to lend to such enterprises due to lack of track record. In addition, the IFS was enhanced to increase the maximum loan quantum from S$15 million to S$30 million, to support businesses for bigger overseas projects.

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