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[h=2]Proposal to set up a government-led SME bank to help SMEs[/h]
March 13th, 2013 |
Author: Contributions
[Committee of Supply Cuts by NCMP Yee Jenn Jong on Ministry of Trade and Industry in Parliament on 11 Mar 2013]
SME Bank
NCMP Yee Jenn Jong
The service economy is increasingly important to Singapore. Excluding Financial and Insurance, the service sector had 135,000 enterprises and employed 1.35 million workers in 2010.
The 2012 SME Development Survey highlighted that 50% more service sector SMEs found bank financing a challenge compared to the previous year. This is despite the availability of government-backed loans through financial institutions. The survey also found more SMEs facing cash flow problems and worsening liquidity.
Service sector SMEs generally require working capital financing such as supplier invoice financing, working capital term loans and factoring. They are generally asset light with little collaterals. Financial institutions are cautious and tend to make unsecured lending only to bigger mid-sized SMEs. With the Basel III minimum adequacy requirement, banks are likely to tighten loans to smaller and riskier SMEs.
Government lending to SMEs has been implemented in countries such as USA, South Korea and Malaysia to address market failure in working capital financing loans to SMEs. A government-led SME bank will be useful for the following:
(1) SMEs with track record of less than 3 years. SMEs have highlighted that banks generally offer financing to SMEs with more than 3 years of track record.
(2) SMEs with small scale operations. Financial institutions tend to focus on mid-sized enterprises.
(3) SMEs with intangible assets. Many knowledge or technology-based companies have intangible intellectual properties which banks are unable to assess. I understand there was previously a government backed unsecured loans to tech start-ups through the now defunct Keppel-Tat Lee Bank called TechFinancing. Is the government supporting more of such schemes?
To alleviate concern that the SME bank will crowd out private sector lenders, the SME bank can be a lender of last resort to the under-served small SMEs. Alternatively, the government can form tighter partnerships with existing financial institutions to serve this market.
.
Yee Jenn Jong
Non-constituency Member of Parliament
[Source]: Yee Jenn Jong’s blog (http://yeejj.wordpress.com/).
.
Read more at http://www.tremeritus.com/2013/03/1...ment-led-sme-bank-to-help-smes/#ixzz2NQgfCqcd
Under Creative Commons License: Attribution Non-Commercial No Derivatives
Follow us: TREmeritus on Facebook
[Committee of Supply Cuts by NCMP Yee Jenn Jong on Ministry of Trade and Industry in Parliament on 11 Mar 2013]
SME Bank
The service economy is increasingly important to Singapore. Excluding Financial and Insurance, the service sector had 135,000 enterprises and employed 1.35 million workers in 2010.
The 2012 SME Development Survey highlighted that 50% more service sector SMEs found bank financing a challenge compared to the previous year. This is despite the availability of government-backed loans through financial institutions. The survey also found more SMEs facing cash flow problems and worsening liquidity.
Service sector SMEs generally require working capital financing such as supplier invoice financing, working capital term loans and factoring. They are generally asset light with little collaterals. Financial institutions are cautious and tend to make unsecured lending only to bigger mid-sized SMEs. With the Basel III minimum adequacy requirement, banks are likely to tighten loans to smaller and riskier SMEs.
Government lending to SMEs has been implemented in countries such as USA, South Korea and Malaysia to address market failure in working capital financing loans to SMEs. A government-led SME bank will be useful for the following:
(1) SMEs with track record of less than 3 years. SMEs have highlighted that banks generally offer financing to SMEs with more than 3 years of track record.
(2) SMEs with small scale operations. Financial institutions tend to focus on mid-sized enterprises.
(3) SMEs with intangible assets. Many knowledge or technology-based companies have intangible intellectual properties which banks are unable to assess. I understand there was previously a government backed unsecured loans to tech start-ups through the now defunct Keppel-Tat Lee Bank called TechFinancing. Is the government supporting more of such schemes?
To alleviate concern that the SME bank will crowd out private sector lenders, the SME bank can be a lender of last resort to the under-served small SMEs. Alternatively, the government can form tighter partnerships with existing financial institutions to serve this market.
.
Yee Jenn Jong
Non-constituency Member of Parliament
[Source]: Yee Jenn Jong’s blog (http://yeejj.wordpress.com/).
.
Read more at http://www.tremeritus.com/2013/03/1...ment-led-sme-bank-to-help-smes/#ixzz2NQgfCqcd
Under Creative Commons License: Attribution Non-Commercial No Derivatives
Follow us: TREmeritus on Facebook
