MAS launches MAS SGD Facility for ESG Loans to aid SMEs in obtaining cheap loans

A near-zero interest rate government-assisted loans will be offered by the Monetary Authority of Singapore (MAS) and Enterprise Singapore (ESG) to eligible banks. The borrowing rate, 0.1 per cent per year for a two-year tenor is aimed at supporting small and medium-sized enterprises (SMEs) lending. With this, SMEs will be more able to withstand the COVID-19 crisis.
According to the joint statement by MAS and ESG on Monday (20 April), the move will help reduce the cost of loans for the Temporary Bridging Loan Programme and the Enhanced Enterprise Financing Scheme-SME Working Capital Loan.
For such loans taken from 8 April this year until 31 March next year, the borrowing costs will be lower.
Under the Temporary Bridging Loan Programme, local companies are assisted in managing their immediate cash flow needs.
Companies can also apply for the Enhanced Enterprise Financing Scheme-SME Working Capital Loan if they need more working capital beyond what the programme provides.
MAS first announced the latest measure when it introduced baseline measures for banks and financials to aid companies during the pandemic. The measure will last until April next year.
The interest rates on government-assisted loans can be lowered by the bank via the facility by 2-3 per cent, compared to the higher 6 per cent or more at the start of the year, OCBC Bank Global Commercial Banking Head, Linus Goh pointed out.
Mr Goh said: “We will pass all the cost savings to the SMEs and have also waived our processing fees for the new loans.”
On the same note, Kurt Wee, who is the President of the Association of Small and Medium Enterprises also commented: “The rapid support given to small business arising from the coordination among banks like OCBC, MAS and ESG is also unprecedented.”
“This makes me believe that we can all bounce back and then grow from strength to strength after the outbreak,” although “the last two months have wiped out many small business owners’ years of effort in savings and building their business,” he explained.
Mr Wee also noted: “Many are doing all they can to keep fighting to stay afloat – not just for themselves, but for the livelihood of their employees.”
So far, the initiative has no funding cap yet, as tentatively stated by the Straits Times.
When financial institutions price SME loans, they normally take into account a credit spread to reflect the borrower’s risk profile as well as the costs of funds and underwriting, MAS and ESG stated.
The joint-statement read: “By providing financial institutions funding at the low interest rate… the facility reduces the financial institutions’ cost of funds for loans made under the ESG Loan Schemes,” and in turn “this will help SMEs manage their cash flow better amidst the current Covid-19 pandemic.”
The government will also increase its risk share of loans from 80 per cent to 90 per cent, according to a statement in Parliament on 6 April by Deputy Prime Minister and Finance Minister, Heng Swee Keat.
The MAS and ESG highlighted that the goal of this initiative is to complement the government’s initiatives.
According to the statement: “The facility also reinforces MAS efforts to ensure ample Singdollar funding to banks in Singapore, by maintaining a high level of Singdollar liquidity in the banking system, so that they can continue to play their role in providing credit to individuals and businesses in Singapore.”
Ravi Menon, who is MAS Managing Director, remarked that MAS expects the new initiative to spur banks and finance firms to lend more funds to SMEs at a cheaper rate.
“Together with the various relief measures that banks and finance companies are providing SMEs as part of the package announced by MAS (last month), this latest initiative will help provide strong support to our SMEs, which are a vital part of our economy,” he elaborated.
Png Cheong Boon, who is ESG Chief Executiv, also shared the same sentiment: “We hope that financial institutions would be able to extend loans… 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.”

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