Singapore Govt won’t let good businesses go down
By Robin Chan
THE Government will soon enhance schemes to help cash-strapped businesses secure bank loans, Finance Minister Tharman Shanmugaratnam said in Parliament yesterday.
This is to avoid a scenario where good businesses are forced to close down owing to a lack of access to credit, he said.
Mr Tharman said the new measures will enhance existing loan schemes, and will mostly involve the Government sharing the risk of the loans with the banks.
Prime Minister Lee Hsien Loong had said on Sunday that with a protracted economic slowdown looming, some measures to help businesses and workers would be announced this week.
Yesterday, Mr Tharman told MPs that while total bank lending to non-bank customers has continued to grow in the 12 months to September, some credit tightening is ‘inevitable’ given the current economic downturn.
‘The Monetary Authority of Singapore’s assessment is that while there is no large scale credit crisis in Singapore, some segments of borrowers may face higher borrowing costs.’
With recent feedback showing that banks had stopped lending to some businesses, MP Lee Bee Wah (Ang Mo Kio GRC) asked: ‘Is there any channel that businesses can turn to should this really happen at the ground? Because we would not want to see good businesses being killed prematurely.’
In response, Mr Tharman said: ‘I quite agree with Ms Lee that we would not want to see good, viable businesses, which are the majority, having to cease business or scale down significantly… because of a lack of access to credit.
‘So the Government has been studying this carefully, taking in feedback, and will be making announcements soon on the enhancement of loan schemes which involve risk sharing with the banks so as to ensure that we maintain access to credit on the part of our companies.’
In terms of the interbank market, in which banks lend to each other, he told MPs that there has been ’sufficient liquidity in the system’.
‘We have not seen the market freeze up, as happened in some other global financial centres in recent months. Banks have been able to obtain Singapore dollar funding among themselves in an orderly manner.
‘We are unlikely to see this (tightening of bank credit) happen on the scale that is occurring in many other parts of the world, where banks are tightening credit not only because of increased risks that they perceive in a downturn but because they are short of capital.’
In fact, as at Sept 30, total bank lending to non-bank customers was still growing, he said.
Loans to the building and construction sector increased by about 50 per cent in the 12 months to Sept 30, compared with the same period last year.
He said small- and medium-sized enterprises have lifted their use of existing schemes significantly, citing that the amount of loans under both the local enterprise finance scheme and the loan insurance scheme grew by more than 55 per cent in the first eight months over the same period last year.
He added that it would be inappropriate for the Government to direct banks to lend or to get involved with to whom they should lend.
‘These are commercial decisions which banks themselves have to take, based on their assessment of the risks as well as the relationships they maintain with their customers… Our banks make these assessments carefully, and take into account both the short-term risks and their long-term interests in keeping their customers. We should continue to leave these decisions to them.’
Source : Straits Times - 19 Nov 2008
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