MAS and ESG launch new facility to help banks and FIs lower cost of loans to SMEs

The Monetary Authority of Singapore (MAS), in partnership with Enterprise Singapore (ESG), launched the new MAS SGD Facility for ESG loans to lend Singapore dollars (SGDs) at an interest rate of 0.1% per annum to eligible financial institutions to support their lending to small and medium-sized enterprises (SMEs) under the ESG Loan Schemes.

The ESG Loan Schemes include the Enhanced Enterprise Financing Scheme - SME Working Capital Loan (EFS-WCL) and the Temporary Bridging Loan Programme (TBLP).

The Facility will help financial institutions (FIs) to make loans to SME borrowers more affordable. In pricing SME loans, FIs typically take into account their cost of funds, their cost of underwriting and a credit spread to reflect the risk profile of the borrower. By providing FIs funding at the low interest rate of 0.1% per annum, for a two-year tenor, the facility reduces the financial institutions’ cost of funds for loans made under the ESG loan schemes. This will help SMEs manage their cash flow better amid the current COVID-19 pandemic.

The Facility complements the enhancements to the ESG Loan Schemes announced on 6 April 2020 as part of the solidarity budget, where the government increased its risk-share of loans to 90%. The TBLP is intended to help local enterprises manage their immediate cash flow needs. SMEs that require additional working capital beyond the TBLP can tap on the EFS-WCL. 

The Facility also reinforces MAS efforts to ensure ample SGD funding to banks in Singapore by maintaining a high level of SGD liquidity in the banking system, so that they can continue to play their role in providing credit to individuals and businesses in Singapore.

MAS’ managing director Ravi Menon said, “The MAS Facility works in tandem with the ESG Loan Schemes to help lower borrowing costs for SMEs. With the government sharing 90% of the risk on such loans and MAS providing funding at almost zero cost under the Facility, banks and finance companies will be able to make more loans to SMEs and at lower cost. In fact, we expect them to do so.”

“Together with the various relief measures that banks and finance companies are providing SMEs as part of the package announced by MAS on 31 March 2020, this latest initiative will help provide strong support to our SMEs, which are a vital part of our economy,” Menon added.

Png Cheong Boon, chief executive officer of Enterprise Singapore, on the other hand, said, “We are happy to partner with MAS to provide a lower cost of funding to the financial institutions. Together with higher risk sharing by the government, we hope that financial institutions would be able to extend loans under the TBLP and EFS-WCL at lower interest rates to more SMEs, thereby helping them to ease their cash flows, sustain their operations and retain their workers during this difficult period.”

Re-disseminated by The Asian Banker

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