SINGAPORE - The Monetary Authority of Singapore is relaxing some of its rules on finance companies from this year onwards, to make it easier for small and medium-sized enterprises (SMEs) and start-ups to obtain funds from them.
These finance companies, which complement banks in providing loans to businesses, will now be allowed to offer a higher amount of uncollateralised loans to companies.
Currently, a finance company's total uncollateralised lending is capped at 10 per cent of its capital funds, while uncollateralised lending to a single borrower is capped at S$5,000.
These limits will be gradually relaxed. Finance companies will eventually be able to offer uncollateralised loans amounting to up to 25 per cent of their capital funds.
And a single borrower will be able to take up uncollateralised loans amounting to up to 0.5 per cent of the finance company's capital funds.
These finance companies will also be able to offer current accounts and chequing services to businesses.
And they will be able to join electronic payment networks such as Inter-bank Giro, Fast and Secure Transfers (Fast) and Nets.
Singapura Finance chief executive Jamie Teo welcomed the move, saying this will allow finance companies to offer more services to their customers.
"We would be able to issue ATM or debit cards, which we previously could not, which meant that our customers were unable to easily withdraw money or make electronic payments. With this change we would be able to attract more customers."
The MAS will also lift its prohibiton on the takeover of a finance company by a foreign entity.
This will allow finance companies greater flexibility to explore strategic partnerships and innovative business models, the MAS said.
Specifically, the MAS is prepared to consider an application for a merger or acquisition tif the prospective merger partner or acquirer commits to maintaining SME financing as a core business of the finance company.
It must also be able to demonstrate expertise in SME financing and present proposals to enhance the finance company's SME lending activities with new technologies, methodologies or business models.
At the same time, the MAS will enhance corporate governance and risk management requirements for finance companies.
There are three regulated finance companies here - Hong Leong Finance, Sing Investments & Finance and Singapura Finance.
They are a key source of capital for SMEs here. In the second quarter of last year, they accounted for just under S$7 billion in outstanding loans to SMEs.
