Revisit the set up of an Exim Bank for SMEs

Responding to a call by government feedback unit,  REACH Singapore on ideas for the Pre-Budget 2017, a citizen by the name of Patrick Liew suggested that the Government should revisit the setting up of an Exim Bank or a similar institution or initiative to help Small-Medium-Enterprises (SMEs) to enhance their financial position, stability and growth.

Exim Bank is specialist providers of trade finance solutions for all hurdles of international trade.

Here is what he wrote in full :

Local enterprises, especially SMEs are struggling through the double whammy of a slowing down of the economy and increasing business costs. They operate in a tight labour market and face headwinds competing with online businesses and other direct and indirect players in an open and global environment.

One of SMEs’ biggest challenges is availability, affordability and accessibility of capital to help them compete and grow their businesses.

Perhaps, we should revisit the setting up of an Exim Bank or a similar institution or initiative to help SMEs enhance their financial position, stability and growth.

SMEs have limited size, scale and scope of operation. It is more difficult for them to enjoy priority and dedicated service from mainstream financial institutions and to access alternative financing. In addition, SMEs have greater challenges to assure lenders of their financial position and credit-worthiness.

They also face challenges to convince lenders to invest in projects that are of a higher risk in nature, especially investment in new markets, technology, innovation and systems that are outside of the normal radar screen.

Mainstream financial institutions are not inclined to go beyond offering conventional financial services to SMEs. They are unlikely to provide provide strategic and long-term business services such as identifying new business opportunities and offering assistance to help SMEs to capitalise on them.

They may not fully understand the practical needs of SMEs and be as as willing to co-invest or share the risks with SMEs to capitalise on a project.

With their focus on the bottom line, they are not as predisposed to invest in helping SMEs develop their infrastructure, support and services to grow their business and become the next generation of world-beaters.

An EXIM Bank or a similar venture can cover these essential gaps and also be more more focused in meeting the other needs and requirement of the SMEs.

For example, it can provide leadership and advice to help SMEs merge their operations or hunt as a pack. By doing that, it can help them enjoy economy of scale, link diverse markets, and strengthen their competitive edge and value-additions.

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