MAS offers near-zero interest rate loans for banks

The facility aims to help make loans more affordable for SME borrowers.

The Monetary Authority of Singapore (MAS), in partnership with Enterprise Singapore (ESG), has launched a facility that will lend Singapore dollars at an interest rate of 0.1% per annum to eligible banks and finance companies to support their lending to small and medium enterprises (SMEs), the regulator announced in a press release.

The MAS SGD Facility for ESG Loans aims to help financial institutions make loans more affordable for SME borrowers.

“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,” the press release stated. This, in turn, will reportedly help SMEs manage their cash flow better amidst the ongoing pandemic.

The ESG Loan Schemes comprise the Enhanced Enterprise Financing Scheme - SME Working Capital Loan (EFS-WCL) and the Temporary Bridging Loan Programme (TBLP).

The facility also reinforces the regulator’s efforts to ensure ample SGD funding to banks in Singapore, by maintaining a high level of SGD liquidity in the banking system, added MAS.