Press Release
LCQ10: Banks' loans to SMEs
June 27, 2001
Following is a question by the Hon Kenneth Ting and a written reply by the Acting Secretary for Financial Services, Ms Au King-chi, in the Legislative Council today (June 27):
Question:
It has been reported that due to the recent shortage of capital outlets, local banks have become more active in furnishing loans to small and medium enterprises ("SMEs"). In this connection, will the Government inform this Council whether:
(a) there is an obvious upward trend in the total amount of unsecured loans furnished by local banks to the commercial and industrial sectors; if so, of the specific statistics;
(b) it will regularly compile and publish the statistics mentioned in item (a) above; if so, of the arrangements concerned; if not, the reasons for that; and
(c) it knows if banks, in vetting and approving the loan applications of SMEs, have gradually lowered the requirements on the financial documents to be submitted; if that is the case, of the details?
Reply:
Madam President,
My reply to parts (a) and (b) is as follows: -
Based on feedback to the Hong Kong Monetary Authority (HKMA) from a number of banks that are active in SME lending, there are noticeable signs that banks have devoted more efforts to expanding this business. The majority of these banks indicated that their lending to SMEs had grown in the past year. We have no information as to whether the loans were unsecured. Some banks indicated that they had relied less on collateral and had been willing to extend unsecured credit to an SME which had good business prospect and sound financial position.
To promote SME lending, some banks have established separate business units that focus exclusively on lending to SMEs. Such moves have helped simplify and speed up the credit approval process. Others have increased marketing efforts to attract SME business, such as through advertisements on newspapers and the Internet, promotional pamphlets and participation in seminars organised by the Trade Development Council and the Productivity Council.
At present, the Government does not compile and publish regularly statistics on bank lending to SMEs. Moreover, different definitions for 'SMEs' according to individual banks' policies will make compilation of statistics difficult. From the HKMA perspective, the statistics now collected from banks are adequate for the purpose of prudential supervision.
My reply to part (c) is as follows:
Banks have continued to seek comprehensive information from borrowers for making prudent lending decisions. They try to obtain applicants' audited financial statements. Nevertheless, they do not rely solely on such statements in assessing their loan applications.