The Monetary Authority of Singapore (MAS) on February 14 announced changes to strengthen the resilience of finance companies and enhance their ability to provide funding to small- and medium sized enterprises (SMEs).

Illustrative image (Source: fintechnews.sg)

The decision is expected to increase financial channels, meeting the demand of young businesses with high growth and hope to innovate through technology infrastructure, in line with recent recommendations proposed by the Committee on the Future Economy.

Under the new regulation, the limit on a finance company’s aggregate uncollateralised business loans will be raised to 25 percent of its capital funds, from the current 10 percent. The limit on uncollateralised business loans to a single borrower will also be raised to 0.5 percent of capital funds.

These changes will better enable finance companies to serve their SME customers, many of whom require unsecured credit for working capital needs, stated the MAS.
Besides, finance companies will be able to provide more comprehensive credit and deposit services to SMEs, since they will also be allowed to join electronic payment networks, including Inter-bank GIRO, Fast and Secure Transfers (FAST) and Electronic Funds Transfer at Point of Sale (EFTPOS).

To safeguard prudential standards, the MAS will also require finance companies to enhance their corporate governance and risk management, including stricter rules on related party transactions and limits on exposures to the property sector.

Currently, Hong Leong Finance, Sing Investments and Finance and Singapura Finance are three licensed finance companies by the MAS with around 16 billion SGD (11 billion USD) in combined assets. Those companies accounted for seven billion SGD (about five billion USD) of outstanding SME loans, by the second quarter of 2016.

(Source: VNA)