Small businesses and home mortgage borrowers are most exposed when high interest rates and falling asset prices combine to exert pressure on cash flow. Timely access to financial relief can make a difference to survival.
Within the bounds of prudence, they need lenders to expedite eligible applications for accommodation and reflect temporary business conditions in their loan assessments. It is therefore good news that 11 of Hong Kong’s banks have pledged to provide fair and quicker access to loans, as they heed the call by the city’s de facto central bank to cut red tape and provide funding help.
Small and medium-sized business is the life blood of the grass-roots economy and the backbone of employment. The city remains in extended recovery mode from the pandemic slowdown.
The highest interest rates for nearly two decades have weighed on fragile confidence when consumers and business alike both needed the reassurance of stability and certainty.
Hanging on for interest rates to come down has not proved a viable strategy for many borrowers. It has taken longer than expected for higher rates to satisfy economic policymakers that they have tamed inflation.
As a result, according to the Hong Kong General Chamber of Commerce, cash flow is the biggest challenge in the next 12 months for 74.3 per cent of business owners surveyed recently.
Some SMEs have been asked by their lenders to fortify their property collateral, as real estate prices have fallen against banks’ valuations. The squeeze prompted action from the 11 members of the Hong Kong Monetary Authority’s task force on SME lending, jointly chaired by the body’s deputy chief executive Arthur Yuen Kwok-hang and Hong Kong Association of Banks chairwoman Luanne Lim.
Yuen said six of the biggest banks, with a combined 80 per cent share of the city’s mortgages, pledged to approve all eligible applications within two weeks – compared with two to three months currently, according to Eric Tso Tak-ming, chief vice-president of mortgage broker mReferral.
“SMEs are vital to Hong Kong’s society and economy,” said Sun Yu, the chief executive of the Bank of China (Hong Kong), who described support for them as a social responsibility.
Financial Secretary Paul Chan Mo-po last week urged the six largest banks to ease the liquidity pressure for SMEs and to ensure that the quick-approval policies would be executed at the front line.
The coordinated and cooperative response of the market and the authorities is welcome, and an essential platform for a sustainable recovery by small and medium-sized businesses from economic pressures beyond their control.
