HKMA has recently introduced several different strategic measures to support SMEs’ development, upgrade and transformation.
The Hong Kong Monetary Authority (HKMA), together with the banking sector, introduced measures in order to further support, via financing as well as banking products and services, the “continuous development” of small and medium-sized enterprises (SMEs) and assist them in effectively expanding new businesses and markets.
Since the introduction of the a number of key SME support measures by the HKMA and the Banking Sector SME Lending Coordination Mechanism (Mechanism) in March this year, a total of about 20,000 SMEs have benefitted from the measures, involving an “aggregate credit limit of over HK$44 billion.”
The HKMA stated that has also been deepening its understanding of the challenges and needs faced by SMEs of different sectors through various channels and platforms, including the Taskforce on SME Lending (Taskforce) which was established in August this year, and engagement sessions with over 50 trade associations and their members from different industry sectors.
While Hong Kong is undergoing economic transformation, the HKMA and the banking sector are “aware of the needs” of SMEs to strive for change and adapt to changes in the market.
As mentioned in the announcement, the HKMA and the banking sector will roll out the measures to assist SMEs’ development and transformation, and enhance their productivity to cope with challenges:
- Release of bank capital to facilitate the financing needs of SMEs: The HKMA lowered the countercyclical capital buffer (CCyB) ratio from 1% to 0.5%, and will allow banks to early adopt the preferential treatments for SME exposures under the Basel III capital framework. These policies will release bank capital and thereby enable banks to make use of the additional capital to facilitate the financing needs of SMEs.
- Set aside dedicated funds to support SMEs: The 16 banks that are active in SME lending have set aside a total of over HK$370 billion of dedicated funds for SMEs in their loan portfolio. The funds will allow SME customers to access necessary financing for coping with the evolving business environment. The banks will regularly review and consider scaling up the size of their dedicated funds in response to SMEs’ needs and development.
- Launch more credit products as well as services in order to assist SMEs’ transformation: Banks will launch more credit products and services to meet the transformation needs of SMEs. Examples include pre-approved credit limits, unsecured loans, cross-border loans, and loans with flexible repayment periods.
On digital transformation, banks will offer e-commerce financing and electronic payment services to enable SMEs in different sectors such as retail, catering and trading to better utilise data and adopt innovative business solutions, so that SMEs can “strengthen their marketing and promotion, streamline business processes and save operating costs.”
On green transformation, banks will “actively consider” launching relevant advisory services.
Through collaboration with green certification agencies, banks can alleviate the costs for SMEs to apply for green certification, thereby supporting their low-carbon transition.
Banks will also reportedly offer green loans to assist SMEs in purchasing and adopting low-carbon equipment, so as to reduce the SMEs’ “own carbon emissions and transform into green suppliers.”
Increase the partial principal repayment options:
When an orderly exit from the banking sector’s Pre-approved Principal Payment Holiday Scheme commenced in July 2023, the Mechanism introduced enhanced measures to “assist corporates’ gradual return to normal repayment.”
Since some clients’ partial “principal repayment arrangements” are set to expire in early 2025, banks will be “accommodative” and consider offering more flexible repayment arrangements to help these customers to address challenges “encountered during economic transformation. Such arrangements include,” for instance, “extending the duration of partial principal repayment, offering more options on the proportion and duration of partial principal repayment, or even offering principal moratorium, subject to prudent risk-management principles.”
The said arrangements are also applicable to taxi loans, public light bus loans and commercial vehicle loans “taken out by personal customers.”
Allocating sufficient manpower as well as ample resources to implement the enhancements to SME Financing Guarantee Scheme as soon as possible:
Banks will allocate adequate resources to process applications and work closely with HKMC Insurance Limited to implement as soon as possible the principal moratorium and other enhanced measures under the SME Financing Guarantee Scheme.
The HKMA concluded that it would continue to understand the SME-related business strategies of banks, and maintain close communication with the commercial sectors via the Mechanism and the Taskforce.
Seminars and other activities will be held in order to support the SME services, products as well as schemes offered by the banking sector in the “concerted efforts” to assist the development, upgrade and transformation of SMEs.Hong Kong Monetary Authority.