SMEs in Singapore have been hit particularly hard by the COVID-19 pandemic. As such, many are now struggling with issues regarding cash flow as businesses and the economy comes to a halt. As such, a new initiative is being undertaken to allow SMEs that need help to manage immediate cash flow to take out government-assisted bank loans at a lower interest rate.
The Monetary Authority of Singapore (MAS) and Enterprise Singapore on 20 April launched a new facility to lend Singapore dollars at 0.1 per cent interest per annum to eligible financial institutions.
Banks are expected to pass on the cost savings, to make more loans to SMEs at a lower cost.
“By providing financial institutions funding at the low interest rate of 0.1 per cent per annum for a two-year tenor, the facility reduces the financial institutions’ cost of funds for loans made under the ESG (Enterprise Singapore) Loan Schemes. This will help SMEs manage their cash flow better amidst the current COVID-19 pandemic,” said MAS and Enterprise Singapore.
This move by MAS comes on top of enhancement to ESG loan schemes that were announced earlier in April as part of the Solidarity Budget; thus raising the government’s risk-share of loans to 90 percent.
The new facility also works to strengthen Mas’ efforts to ensure sufficient funding to banks in Singapore, by maintaining a high level of Sing dollar liquidity in the banking system, said the central bank.
“The MAS facility works in tandem with the ESG Loan Schemes to help lower borrowing costs for SMEs,” said MAS managing director Ravi Menon.
“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.”
