MAS SGD Facility for ESG Loans launched to support lending to SMEs

The Monetary Authority of Singapore (MAS) on April 20, launched the MAS SGD Facility for ESG Loans (the Facility) in partnership with Enterprise Singapore (ESG), to lend Singapore Dollars (SGD) at an interest rate of 0.1% per annum to eligible financial institutions, to support their lending to SMEs under the ESG Loan Schemes. The ESG Loan Schemes comprise the Enhanced Enterprise Financing Scheme – SME Working Capital Loan (EFS-WCL) and the Temporary Bridging Loan Programme (TBLP).

The MAS SGD Facility for ESG Loans was first announced in MAS’ media release on 31 March 2020. Banks and finance companies participating in the ESG Loan Schemes are eligible to tap the Facility.

The MAS SGD Facility for ESG Loans will help financial institutions to make loans to SME borrowers more affordable. In pricing SME loans, financial institutions typically take into account their cost of funds, their cost of underwriting, and a credit spread to reflect the risk profile of the borrower. By providing financial institutions funding at the low interest rate of 0.1% per annum, for a two-year tenor, 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 MAS SGD Facility for ESG Loans complements the enhancements to the ESG Loan Schemes announced on 6 April 2020 as part of the Solidarity Budget, where the Government increased its risk-share of loans to 90%. The TBLP is intended 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.

The MAS SGD Facility for ESG Loans also reinforces MAS efforts to ensure ample SGD funding to banks in Singapore, by maintaining a high level of SGD liquidity in the banking system, so that they can continue to play their role in providing credit to individuals and businesses in Singapore.

Mr Ravi Menon, Managing Director, MAS, said, “The MAS Facility works in tandem with the ESG Loan Schemes to help lower borrowing costs for SMEs. 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. 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.”

The Monetary Authority of Singapore (MAS) is Singapore’s central bank and integrated financial regulator. As central bank, MAS promotes sustained, non-inflationary economic growth through the conduct of monetary policy and close macroeconomic surveillance and analysis. It manages Singapore’s exchange rate, official foreign reserves, and liquidity in the banking sector.

As an integrated financial supervisor, MAS fosters a sound financial services sector through its prudential oversight of all financial institutions in Singapore – banks, insurers, capital market intermediaries, financial advisors, and stock exchanges. It is also responsible for well-functioning financial markets, sound conduct, and investor education. MAS also works with the financial industry to promote Singapore as a dynamic international financial centre. It facilitates the development of infrastructure, adoption of technology, and upgrading of skills in the financial industry.

Mr Png Cheong Boon, Chief Executive Officer of Enterprise Singapore, said, “We are happy to partner MAS to provide lower cost of funding to the financial institutions. Together 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.”

Enterprise Singapore is the government agency championing enterprise development. It works with committed companies to build capabilities, innovate and internationalise. It also support the growth of Singapore as a hub for global trading and startups, and build trust in Singapore’s products and services through quality and standards.