A Report on the Review of the SME Funding Schemes

1.1 In June 2001, the Small and Medium Enterprises Committee (the Committee) submitted to the Chief Executive (CE) a report on SME support. The recommendations in the report were accepted by the Government for implementation. These include the establishment of four SME funding schemes ^{(Note 1)} with a total commitment of $7.5 billion. The Committee is pleased to note that the funding schemes have gone a long way towards encouraging SMEs to strive for continuous self-improvement, and to take further efforts to enhance productivity, upgrade human resources and explore overseas markets, with a view to enhancing overall competitiveness.

1.2 When the Government launched the four funding schemes in late 2001/early 2002, it undertook to conduct a comprehensive review about one year after their implementation. The Committee has been closely monitoring the operation of the schemes since their implementation, and has been providing feedback to the Trade and Industry Department (TID). In response to an earlier suggestion by the Secretary for Commerce, Industry and Technology, the Committee has brought forward the comprehensive review to August 2002.

1.3 The review aims to assess :

1. whether the funding schemes have achieved their objectives; and

2. whether it is necessary to improve the schemes and, if so, how.

1.4 The review covers the following aspects :

1. progress of individual funding schemes;

2. awareness of the schemes among SMEs;

3. effectiveness of the schemes;

4. major features of individual schemes, including the guarantee amount, use of loans and the guarantee period in respect of the BIG, as well as the amount of grant, the cost-sharing ratio, and the scope of the other three schemes; and

5. proposals to further improve the effectiveness of individual schemes.

1.5 The Committee conducted two surveys on the funding schemes. One was a continuous survey, commenced since March 2002, to ascertain how the BIG and the EMF have facilitated successful applicants to expand businesses. Another survey, which was one-off in nature, was conducted in August 2002 to collect feedback from the following enterprises and organisations, which were randomly selected, on the four funding schemes :

1. 50% of the SMEs which have applied for the funding schemes;

2. about 8 000 SMEs which have not yet applied for the BIG, the EMF and the STF (they were either randomly selected from the database of the Census and Statistics Department, or accessed through trade and industrial organisations), and 100 trade and industrial organisations which have not yet applied for the SDF;

3. the 48 lending institutions which have participated in the BIG at the time of the survey; and

4. 56 professional organisers of export promotion activities.

1.6 In August 2002, the Committee invited various trade and industrial organisations and other relevant parties to a consultation meeting to exchange views on the funding schemes.

1.7 After a careful review of the operation of the funding schemes, the Committee is of the view that the schemes are of practical use to SMEs, and are effective in helping SMEs equip themselves for new challenges and opportunities. This is demonstrated by the fact that about 9 330 SMEs have benefited from the schemes since they were launched about 11 months ago, and that the amount of guarantee/grant has reached about $1.05 billion. The BIG alone has helped SMEs obtain about $2.2 billion loans from lending institutions for procuring business installations and equipment. Having said that, the Committee considers that by suitably raising the ceilings of the guarantee/grant for individual SMEs, broadening the scope of individual schemes, and rationalising the application procedures, the funding schemes would more comprehensively address the needs of SMEs and benefit more SMEs. To this end, the Committee has come up with a number of recommendations for the Government's consideration. Details of these recommendations are set out in Chapters 2 to 5.

1.8 Should the various recommendations be accepted by the Government, the Committee stands ready to assist in their implementation to ensure that they generate the best results.

Note 1: The four SME funding schemes are -

*SME Business Installations and Equipment Loan Guarantee Scheme (BIG)

*SME Export Marketing Fund (EMF)

*SME Training Fund (STF)

*SME Development Fund (SDF)

Chapter 2 : SME Business Installations and Equipment Loan Guarantee Scheme

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