Tighter credit conditions await SMEs as market volatility escalates

Small firms grapple with higher finance costs.

Small and medium enterprises might have a tougher time getting loans as global economic uncertainties intensify, according to the Monetary Authority of Singapore’s latest Financial Stability Review.

Although financing conditions for SMEs have remained generally positive in 2015, there has been a slight increase in non-performing SME loans in the second quarter.

SMEs also faced slightly higher financing costs, possibly reflecting the pricing in of credit risks on the back of a subdued business outlook.

“Looking ahead, SMEs could face tighter financing conditions as banks expect to tighten credit terms and conditions in response to the economic uncertainties,” said the report.

Under the Industry-Wide Stress Test 2015, banks reported higher NPL ratios for loans to SMEs across major industry sectors.

“Credit risk-sharing schemes for SMEs, such as those implemented by the government in 2008 – 2009, could help to ensure that viable SMEs continue to have access to credit to sustain their operations,” said the report.