Legislative Council Panel on Trade and Industry



This paper reports on progress in the operation of the Special Finance Scheme for Small and Medium Enterprises (SMEs) and sets out some brief comments on the submissions to the Panel on the Scheme.


2. As of 24 December 1998, a total of 699 applications under the Scheme have been referred to the Government by participating lending institutions. With the exception of 5 applications which have been withdrawn by the applicants, all of the applications have been approved with the guarantee approved and loan involved amounting to HK$481 million and HK$972 million respectively.

3. The detailed statistics showing the various aspects of the performance of the Scheme up to 24 December 1998 are set out at the Annex.


4. The Government has been closely monitoring the progress of the Scheme since its inception. We are currently preparing for a comprehensive review of the Scheme in early 1999. The review will assess feedback on the Scheme; whether it has met its objective of assisting SMEs to obtain financing; and whether and how improvements should be made. We are conducting an opinion survey to collect views from the financial institutions and the SME sector as part of the review exercise. We shall analyse the opinions collected, together with other comments submitted to us from concerned parties, and formulate our recommendations in early 1999.


5.The Panel has recently put up an advertisement inviting submissions from the public on the Scheme. A few organisations have submitted their views to the Panel. These submissions have been referred to the Trade and Industry Bureau for consideration.

6.One main issue raised in the submissions is whether the loan applications under the Scheme could be assessed on a more favourable basis so as to benefit more SMEs. This has to be considered against the background that the Scheme is run on a market-driven basis and relies on participating lending institutions to exercise their usual prudent professional judgement in assessing applicants' creditworthiness. Such arrangement would ensure the effectiveness and efficiency of the Scheme.

7.Another main point made in the submissions is whether the risk sharing ratio of the Scheme could be increased in favour of the participating lending institutions so as to provide a greater incentive for the latter to make use of the Scheme. We agree that an adequate incentive should be provided to encourage participating lending institutions to utilize the Scheme. On the other hand, however, we need to safeguard the proper use of public funds. A proper balance should be struck between these two considerations in determining the risk sharing ratio.

8.All the views and comments set out in the submissions will be considered in detail in the comprehensive review of the Scheme.

Trade and Industry Bureau
December 1998


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