Singapore not ready for cross-border financing

The current trade financial schemes are constrained by the relatively under-developed export credit insurance market.

According to Lim Hwee Hua, Second Minister for Finance and Transport, SMEs face hurdles for two main types of cross-border financing needs.

The first hurdle is that there is inadequate access to trade and internalisation finance, especially for emerging markets.

The second is the limited capacity in the market for long-tenor project finance.

Mrs Lim said, "We currently have several trade and internalisation financing schemes."

However, she said, the current schemes are constrained by the relatively under-developed export credit insurance market and reduced risk appetites of the financial institutions post-financial crisis.

She explained that risk-sharing is less effective in facilitating financing where existing market players lack capabilities to underwrite risks.

"Our SMEs, who typically have to internationalise at a relatively earlier stage than their counterpart often do not have sufficiently diversified portfolios to obtain insurance for individual transactions," she adds.

To improve the current scheme-based approach, the government is looking into the possibility of an outsourced approach to target the delivery of the trade financing schemes to better meet the needs of the SMEs.

Mrs Lim said: "Under this model, we will engage private providers to administer a trade and internationalisation finance programme for the Government in return for a fee."

"These providers would have the expertise in risk assessment and underwriting, and can customize finance terms to match the risk profiles of transactions."

"This company-centric approach would be an improvement from the current approach of a fixed set of scheme conditions for all firms. Companies will benefit from support that is better tailored to their financing needs and more responsive to market conditions."

The Government will continue to provide support in the form of risk-sharing and premium subsidies.