MAS eases rules on finance firms to help SMEs

It reverses its policy of not allowing a foreign takeover.

The Monetary Authority of Singapore announced that it will be easing some of its rules this year to further boost the resilience of finance companies and their ability to provide financing to small and medium-sized enterprises.

"Finance companies fill a useful niche in SME financing, complementing the role of banks. They often provide more personalised and customised solutions for smaller-sized businesses in particular," MAS noted.

With the announcement, the limit on a finance company’s aggregate uncollateralised business loans will be raised to up to 25% of its capital funds, from the current 10%. The limit on uncollateralised business loans to a single borrower will also be raised to up to 0.5% of capital funds, from the current S$5,000. These changes will better enable finance companies to serve their SME customers, many of whom require unsecured credit for working capital needs.

More so, finance companies will be allowed to offer current account and chequing services to their business customers, as well as join electronic payment networks, including Inter-bank GIRO, Fast and Secure Transfers (FAST) and Electronic Funds Transfer at Point of Sale (EFTPOS).

"These changes will enable finance companies to provide more comprehensive credit and deposit services to SMEs," MAS said.

Along with this, MAS is liberalising its existing policy of not allowing a foreign takeover of a finance company. The authority argued that this will accord finance companies greater flexibility to explore strategic partnerships and innovative business models that can strengthen their SME financing business.

"Specifically, MAS is prepared to consider an application for a merger or acquisition if the prospective merger partner or acquirer commits to maintaining SME financing as a core business of the finance company. In addition, the merger partner or acquirer must be able to demonstrate expertise in SME financing and present proposals to enhance the finance company’s SME lending activities with new technologies, methodologies or business models." MAS said.