Early govt measures to ease credit crunch pay off; figures could rise as Budget initiative kicks in
By
Francis Chan
Mr Phillip Yeo says Spring Singapore will help businesses whose loan applications have been rejected to look for another lender. -- ST PHOTO: JOYCE FANG
EARLY measures taken by the Government to unfreeze credit for businesses are already paying off in a big way.
Government-backed lending jumped sharply last month and in the first few days of this month, said enterprise development agency Spring Singapore at a media briefing yesterday.
The latest data from Spring showed the number of approvals for government-backed loans rose by 82 per cent - from 226 to 411 loans approved - between last December and last month.
Total loan amounts granted to businesses under the schemes also shot up by 77 per cent, from $80.4 million to $142.2 million over the same period.
These upbeat figures relate to the first round of measures to tackle the effects of the global credit crunch, worth $2.3 billion, unveiled by the Government last November, which took effect on Dec 1.
These include existing schemes like the Loan Insurance Scheme (LIS), the Local Enterprise Finance Scheme and the Micro Loan Programme; and new ones like the Bridging Loan scheme and the LIS+.
Budget Day on Jan 22 saw the government schemes reinforced with a $5.8 billion Special Risk-sharing Initiative (SRI) that came into effect on Feb 1.
'The first week of February was when the second enhancement kicked in and we're already seeing 140 loans being approved in just one week,' said Spring chief executive Png Cheong Boon.
He added that discussions with lenders point to more loans being dispersed. 'If that rate continues...we will probably see 500 to 600 approvals for this month.'
Credit, or the lack of it, has been the bane of businesses as the financial crisis choked the flow of credit to firms around the world.
The schemes announced in November and in Budget 2009 last month are designed to get credit flowing to businesses, especially hard-pressed small- and medium-sized enterprises.
Key aspects of the enhanced schemes included more money to help firms insure their loans against defaults, lowering interest rates of government-backed loans by 1.25 percentage points and the Government taking a higher share of the default risk of loans - up to 80 per cent, with the rest taken on by the banks.
In his Budget statement, Finance Minister Tharman Shanmugaratnam introduced the SRI, in which the Government would take on more of the risk in bridging loans and trade financing.
The latest figures were much higher than the monthly averages from the last two years, offering evidence that despite the credit crunch, the Government's move is succeeding in greasing the wheels for firms applying for loans.
In 2007, only 298 loans a month on average, amounting to $59.6 million, were approved and, between January and November last year, only 257 loans amounting to $82.7 million were approved each month, on average.
Mr Tan Yew Kiat, general manager of fashion chain Bysi, said the news will help his company re-ignite growth plans put on hold due to the credit crunch.
'This is great news. Last November, we put aside our expansion plans because we became very cautious with our cash flow, but now with the help from the Government, we can continue our plans to expand locally and regionally.'
Mr Tan, who recently obtained a loan through Spring, said the figures mean viable businesses can take heart that credit is still available despite market rumours of banks getting risk-averse.
Spring chairman Philip Yeo said the agency will assist firms if they run into problems when applying for loans at any of the 14 participating institutions that administer the financing schemes.
Philip Yeo gives his take on the credit issues faced by S'pore firms
On businesses that complained they were not fully aware of what Spring Singapore is doing to help:
'Everybody is in place (at Spring), but you must remember...if you don't come to Spring, you don't come to our EDCs (Enterprise Development Centres) and you complain, then it's wrong. You must step forward first.'
On what businesses can do if their loan applications are rejected by participating institutions (PI):
'All these loans are processed by 14 banks... so if one banks rejects you, try another bank...If one PI rejects you, we will help you with another PI, and there have been cases where they are overturned. But these are all based on commercial decision. Spring will not put pressure on the bank just to give the loan.'
On why the Government should not pressure lenders into granting loans:
'If you want a good example of how to give loans and go bankrupt, look at Fannie Mae and Freddie Mac (the stricken US mortgage giants)...They were pressured by congressmen to give loans and then they go kaput!'
