Hong Kong lawmakers ask HKMA to seek more support from banks after SMEs see trimmed credit lines, tougher collateral requirements

Some of Hong Kong’s small- and medium-sized enterprises (SMEs) have either had their credit lines trimmed or their collateral asks raised, lawmakers said during a meeting of the city’s Legislative Council on Monday.

This tightened lending could not have come at a worse time, with SMEs requiring more bank loans to expand just as Hong Kong’s economy starts growing once again in the post-Covid-19 era, the lawmakers said. They urged the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, to guide the banks to adopt a more supportive approach to SMEs.

“What the banks are doing is just like taking away your umbrella during heavy rain,” Jeffrey Lam Kin-fung, the commerce sector lawmaker, told the meeting. Lam, who is also a key member of the Executive Council, Hong Kong’s key decision-making body, and several other lawmakers also took up the issue with Eddie Yue Wai-man, CEO of the HKMA, during a quarterly meeting of the financial affairs panel on Monday.

SMEs are an important part of Hong Kong’s economy – the city’s 360,000 such firms account for 98 per cent of its businesses and employ 44 per cent of its private-sector workforce, government data shows.

Small businesses are bullish on sales growth, Hong Kong economy: CPA survey

Lam said he had received complaints from scores of SMEs ranging from manufacturers and trading companies to retailers who found their bankers had “tightened up their commercial lending”. Some SMEs had found that their credit lines had been trimmed, while others were required to add more properties as collateral to support their loans, Lam said.

“It is not going to help the many SMEs that now need money to expand their businesses to capture [Hong Kong’s] growth story [at a time] when business has resumed to normal,” Lam said.

Several loan programmes had been launched during the past few years aimed at supporting SMEs during the pandemic, the HKMA’s Yue said on Monday. These programmes were still running, he added.

“Banks have to balance their credit risks,” Yue told the quarterly meeting of the financial affairs panel. “However, the HKMA will also encourage lenders to try their best to support the SMEs, as long as they can manage their risks.”

About 21 per cent of SMEs had reported a tighter stance on their existing credit lines by banks in the first quarter, compared with 18 per cent in the previous quarter, according to a survey released by the HKMA after Monday’s Legislative Council meeting. However, 85 per cent of respondents said they had found similar or easier credit approval in the first quarter, compared with 83 per cent in the previous three months, according to the survey – a poll conducted quarterly – of 2,500 SMEs in Hong Kong.

Hong Kong SMEs may gain if they up their ESG game: analysts

“Many retailers and restaurants want to expand their businesses when tourists are coming back to the city,” retail sector lawmaker Peter Shiu Ka-fai, who did not attend the council meeting on Monday, told the Post separately. “These SMEs have coped with three very difficult years and the owners have run out of savings.”

Shiu had received a number of complaints from SMEs in his sector about difficulties with securing bank loans. “If banks can help to offer more lending to support these companies, they could enjoy the benefit of an economic recovery in the later part of this year,” he added.

The HKMA has followed the US Federal Reserve in increasing key base interest rates 10 times since last March to a 15-year high of 5.5 per cent. The city’s commercial banks have also increased their prime lending rates by 75 basis points.

“Higher interest rates have increased the burden of payments for SMEs,” Robert Lee Wai-wang, the lawmaker for the financial services sector, told the meeting. “Besides, many virtual assets service providers have found it difficult to open bank accounts, while many precious metal traders have also found it hard to get bank support.

“Commercial banks should do more to support these sectors.”