LCQ3: Small and Medium Enterprises Financing Guarantee Scheme
Following is a question by the Hon Chung Kwok-pan and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (February 25):
In January 2011, the Hong Kong Mortgage Corporation Limited (HKMC) launched the Small and Medium Enterprises Financing Guarantee Scheme (SFGS) which aims to help small and medium enterprises and non-listed enterprises with financing difficulties secure loans for meeting operational needs and enhancing productivity and competitiveness. Under the SFGS, HKMC may provide 50 per cent, 60 per cent or 70 per cent guarantee for approved loans (loan guarantees) taken out by eligible enterprises. Given the uncertainties of the global economy in recent years, HKMC implemented special concessionary measures on May 31, 2012 to increase the loan guarantee ratio to 80 per cent of the approved loans, with applications closing on the 28th of this month. In this connection, will the Government inform this Council whether it knows:
(1) (i) the number of applications received, (ii) the number of applications for which loan guarantees were granted, and (iii) the total amount of loan guarantees made, by HKMC under the special concessionary measures each month since April 2013, with a breakdown by the trade of the enterprises;
(2) (i) the number of default cases processed, (ii) the number of default claims received from banks or financial institutions participating in SFGS, (iii) the number of default claims for which compensation was made and its percentage in the total number of default claims, as well as (iv) the total amount of compensation paid, by HKMC under the special concessionary measures since April 2013; and
(3) the average time taken at present by HKMC from receipt of a default claim to making a compensation; the current number of outstanding claims and why the processing of these cases has not been completed; whether HKMC will take measures to expedite the processing of these cases; if HKMC will, of the details?
The Hong Kong Mortgage Corporation Limited (HKMC) launched the market-based SME Financing Guarantee Scheme (SFGS) on January 1, 2011 to provide a market-based loan guarantee scheme for Hong Kong enterprises to assist them in meeting their financing needs.
In the light of the uncertain external economic environment, the Government has provided a total loan guarantee commitment of $100 billion for the HKMC to implement time-limited special concessionary measures under the SFGS from May 31, 2012, under which 80 per cent loan guarantees are offered at a concessionary guarantee fee rate. The application period of the special concessionary measures was originally nine months until end of February 2013, which was subsequently extended twice to end February 2015. My reply to the question is as follows:
(1) From April 2013 to January 2015, the HKMC has received 3 836 applications under the special concessionary measures, of which 3 337 were approved (Note 1). The total guarantee amount approved was around HK$9.9 billion.
The number of applications received, the number of applications approved and the amount of guarantee approved per month under the special concessionary measures and the breakdown statistics by trade are set out in Table 1 and Table 2 respectively.
(2) From April 2013 to January 2015, the HKMC has received 196 net default claims (Note 2) under the special concessionary measures, involving a net default claim amount of about HK$420 million. The HKMC had paid compensations to 11 claims (accounting for 5.6 per cent of the total number of net default claims received). The total amount of compensations involved was about HK$20 million.
(3) Under normal circumstances, the HKMC would respond to a lending institution within 10 working days upon receipt of its default claim indicating whether the claim concerned is approved or not or the additional information/documents the lending institution would need to provide. Of the default claims received from April 2013 to January 2015, 185 cases are still under processing.
To ensure the prudent use of public funds, in processing a default claim, the HKMC needs to conduct due diligence review to verify whether the lending institution has complied with the Master Deed of Guarantee of the SFGS signed with the HKMC as well as its relevant internal policies and procedures in handling loan applications, credit monitoring and default cases under the special concessionary measures. The primary reason why the HKMC cannot complete processing of the default claims is that the lending institutions concerned have yet to provide the HKMC with the required or sufficient documents for such purpose.
To expedite the processing of default claims, the HKMC has had meetings with the lending institutions over the past year to explain the requirements of its due diligence review and to have a better understanding of the internal policies and operation of the individual lending institutions.
(Note 1) 390 applications had been withdrawn by the lending institutions, 80 applications were under processing and 29 applications had been rejected.
(Note 2) Excluding default claims with the outstanding amounts fully repaid after submission of the claims by the lending institutions, and default claims withdrawn by the lending institutions on their own initiative.