SINGAPORE (Apr 20): The Monetary Authority of Singapore (MAS) has launched the MAS SGD Facility for ESG Loans with Enterprise Singapore (ESG).

The facility, which was set up to help make loans to SME borrowers more affordable, will process loans to eligible banks and finance companies at an interest rate of 0.1% per annum for a two-year tenor. This is to support their lending to Small Medium Enterprises (SMEs) under the ESG Loan Schemes.

The Schemes were announced on April 6 as part of the Solidarity Budget, and comprise the Enhanced Enterprise Financing Scheme - SME Working Capital Loan (EFS-WCL) and the Temporary Bridging Loan Programme (TBLP).

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. This will help SMEs manage their cash flow better amidst the current COVID-19 pandemic.

The TBLP was created to help local enterprises manage their immediate cash flow needs. SMEs that require additional working capital beyond the TBLP can tap on the EFS-WCL.

In order to continue their help to provide credit to individuals and businesses in Singapore, the facility reinforces MAS’s efforts to ensure ample funding to banks in Singapore, by maintaining a high level of liquidity of Singapore dollars in the banking system.

“With the government sharing 90% of the risk on such loans and MAS providing funding at almost zero cost under the facility, banks and finance companies will be able to make more loans to SMEs and at lower cost -- in fact, we expect them to do so,” says Ravi Menon, managing director of MAS.

“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,” he adds.

“With higher risk sharing by the government, we hope that financial institutions would be able to extend loans under the TBLP and EFS-WCL 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,” says Png Cheong Boon, CEO of Enterprise Singapore.

DBS’s group head of SME Banking Joyce Tee says DBS is committed to making sure “cost savings gleaned from the MAS SGD Facility for Enterprise Singapore Loans is passed on to our customers”. 

“We have also… waived all processing fees for the new loans since April 1,” she adds, noting that the bank “disbursed twice the number of loans and total loan quantum for government-assisted SME loans, such as the SME Working Capital Loan, as compared to a year ago.”

UOB’s head of group commercial banking Eric Tham welcomed the news.

“Over the last two months, we have seen more SMEs reach a critical stage in their business as they cope with the impact of Covid-19… The facility will reduce our funding costs, enabling us to pass on these savings in full to our SME customers and to provide them with much-needed funds at lower interest rates during this crucial point in time,” he says.

He adds that UOB is dedicated to ensuring their customers access this “much-needed cash flow injection as quickly as possible, with the majority of them being able to draw down on the loan within five working days”.