Business community urges government to set up SME bank

SINGAPORE — Small and medium enterprises (SMEs) are urging the government to set up a bank dedicated to providing affordable financing for a sector that makes up 99 per cent of all enterprises here, a survey released yesterday showed. This comes while the government is setting aside more funds to help young companies grow.

An annual survey conducted by the Singapore Business Federation (SBF) and American Express showed that about half of the 240 polled companies said the creation of a dedicated SME bank would best serve their financing needs.

“SME banks have been set up by governments in countries such as South Korea, Japan and Taiwan. They typically offer SMEs financing with lower interest rates and higher tolerance for risk profile,” SBF chief operating officer Victor Tay said. “In Singapore, such a move may create issues of competition in our small banking market, but an establishment taking a longer stance on lending is what the business community calls for, particularly among the micro-enterprises.”

The call for an SME bank in Singapore comes as more SMEs here seek new or additional funding, with the survey showing that about 52 per cent of respondents expect to do so within the next 12 months.

Bank loans are a top choice for most companies, Mr Tay said, while 44 per cent of the polled companies found asset financing an attractive alternative means to get credit.

The survey comes as the government sets aside additional funds to help SMEs and startups grow amid the ongoing economic restructuring in Singapore.

As part of the Budget plan this year, an additional S$150 million has been set aside for the second phase of the Co-Investment Programme (CIP), adding to the initial S$250 million stockpile when it was set up.

The CIP, which was established in 2010, brings together funds from both the Government and the private sector for investment in enterprises that have passed the start-up stage and may need additional cash to grow.

The government is also increasing its share of the risk under the Micro Loan Programme, which was set up to spur lending to young firms, to 70 per cent from 50 per cent for two years.

And to help companies expand overseas, International Enterprise Singapore provides the Internationalisation Finance Scheme, which has also been enhanced with a higher quantum, from S$15 million to S$30 million currently.