|
A
Report on Support Measures for Small and Medium Enterprises
Chapter
5
The
four funding schemes
5.1
In his Policy Address in October 2000, the Chief Executive said that funds
recouped from the Special Finance Scheme for Small and Medium Enterprises
(SFS) will be used to provide further support for SMEs. Also, the Financial
Secretary announced in his 2001-02 Budget the setting aside of $300 million
for the establishment of a training fund to subsidise SMEs' training initiatives
for their employees. The Committee recommends that these
resources be used to set up the four funding schemes recommended in
Chapter 4, viz. :
- SME Business Installations
and Equipment Loan Guarantee Scheme;
- SME Development
Fund;
- SME Training Fund;
and
- SME Export Marketing
Fund.
5.2
A sum of $300 million has already been earmarked for subsidising SMEs'
training initiatives for their employees. As for the other three proposals,
the resources available will depend on the amount of money which could
be recouped from the SFS. The Committee understands that, according to
latest figures and based on a more conservative projection, the final
default rate for the SFS will probably be in the region of 25% to 30%.
This will mean that around $1 billion can be recouped from the SFS. The
Committee, therefore, recommends that, for the time being,
the Government proceed on the basis that $1 billion will be available
for setting up the three funding schemes. As it will take time for money
to be recouped from the SFS, the Committee recommends that
the Government advance a sum of $1 billion for early implementation of
the three funding schemes. The Committee further recommends the establishment
of a mechanism for the Committee to review, after the first year sof operation,
the effectiveness of the funding schemes. Depending on the outcome of
the review, the Committee may make recommendations on ways to improve
the operation of the funding schemes.
5.3
The Committee sets out in the following paragraphs, for the Government's
consideration, its recommendations on the broad framework for the four
funding schemes. Should the recommendations be endorsed, the Committee
will draw up detailed recommendations regarding the funding criteria and
implementation arrangements.
SME
Business Installations and Equipment Loan Guarantee Scheme
| (I)
Capital amount : |
$500 million |
|
(II) Total commitment : |
$3.3 billion |
(III)
Details
Objective : |
Through
the provision of Government guarantee, the fund aims to help SMEs
secure loans from banks and financial institutions to acquire the
necessary business installations and equipment for enhancing productivity
and competitiveness.
|
|
Target : |
Enterprises which are incorporated in Hong Kong and which meet the
definition of SMEs, excluding lending institutions and their related
firms.
|
| Scope
: |
The loans should be for acquiring installations and equipment relating
to the applicants' business operations, which could include machinery,
computer software and hardware, communication system, stationery,
transport vehicles and furniture and fixtures (such as air-conditioning
system, built-in cabinets and lighting system). The installations
and equipment may be located outside Hong Kong.
|
| Procedures
and criteria : |
-
Loan
applications by SMEs should be forwarded to participating lending
institutions which will assess the applications and determine
whether the applications require the guarantee of the Scheme.
-
To
encourage SMEs to improve their financial management and to
increase the transparency of their accounts, SMEs wishing to
make use of the Scheme are required to submit audited accounts
to the relevant lending institutions.
-
Lending
institutions will refer the endorsed applications for guarantee
to the Government. If the applications are accepted, the Government
will issue guarantees in favour of the lending institutions
for the loans concerned.
|
|
Amount of guarantee : |
The
maximum amount of guarantee offered to each SME is 50% of the approved
loan or $500,000 (whichever is the less). The maximum guarantee
period is three years. The loan is to be repaid by installments.
|
| (IV)
Anticipated effectiveness of the funding scheme |
The
Committee estimates that under normal circumstances, the overall default
rate of the Scheme should not exceed 15%. In order to benefit as many
SMEs as possible, the Committee suggests that the Government work
on the basis of a 15% default rate. With a capital amount of $500
million, the Government will be able to commit a total of $3.3 billion
as the maximum amount of guarantees for the Scheme. Under this scenario,
it is estimated that the Scheme will help SMEs raise at least $6.6
billion in the market, benefiting about 6 600 SMEs. If we assume that
the average size of a loan case is, say $0.7 million, which means
that on average the Government has to provide $0.35 million as guarantee
per loan case, then about 10 000 SMEs will benefit from the Scheme. |
SME
Development Fund
| (I)
Capital amount : |
$200 million
|
| (II)
Details Objective : |
To provide financial support to projects which will enhance the
competitiveness of SMEs in general or SMEs in specific sectors.
|
| Target
: |
Non-profit-making SME support organizations, trade and industrial
organizations, professional bodies and research institutes.
|
| Scope
: |
To subsidise projects proposed and carried out by eligible support
organizations, trade and industrial organizations, professional
bodies and research institutes which aim at enhancing the competitiveness
of SMEs in general or SMEs in specific sectors.
|
| Procedures
and criteria : |
-
Applications
will be invited twice a year. A vetting panel will assess the
applications and make recommendations on their approval or otherwise,
as well as the amount of funds to be granted.
-
To
ensure that resources are well spent, a major funding criterion
should be the number of SMEs which may benefit from the funded
projects.
-
The
funded projects should normally be completed in two years. Projects
which are intended to be operated on a long-term basis will
have to demonstrate their sustainability upon the cessation
of funding support from the Scheme.
-
Applicants
are required to contribute part of the expenses of their projects,
but this requirement may be waived under special circumstances.
-
Applicants
should declare whether they have sought other sources of funding
for their projects. Projects in receipt of other Government
funding will not be funded under the Scheme.
-
Except
in special circumstances, funds approved will be released by
installments. The responsible organizations may be required
to submit progress reports to the vetting panel during the course
of project. In such case, the release of the next tranche of
funds is subject to the satisfactory progress of the project.
|
| Amount
of subsidy : |
The maximum amount of grant for each project is $2 million. |
| (III)
Anticipated effectiveness of the funding scheme |
The
number of organizations likely to benefit from the Scheme depends
on the amount granted to each successful application. If each successful
applicant receives the maximum subsidy amount of $2 million, then
100 projects will be funded. Given the funding criteria in (ii) above,
these projects should benefit a great number of SMEs. On the assumption
that a funded project would on average benefit 200 SMEs, 20 000 SMEs
will benefit from the Scheme. |
SME
Training Fund
|
(I) Capital
amount :
Part 1 : Staff training :
Part 2 : Employers' training :
|
$400 million
$300 million
$100 million |
|
(II) Details
Objective :
|
To encourage
SME employers to pursue self-enhancement, and to provide employees
with training related to the operation of their businesses.
|
| Target
: |
Enterprises which are incorporated in Hong Kong and which meet the
definition of SMEs. |
| Scope
: |
Part 1 : To
subsidise training provided by SMEs to their salaried employees,
which are relevant to the SMEs' business operation.
Part 2 : To
provide subsidy to SME employers to attend training courses relevant
to their business operation.
|
| Procedures
and criteria : |
-
Only
HongKong residents will be eligible.
-
Eligible
training courses include :
-
training
courses provided by local training organizations;
-
overseas
training courses; and
-
training
courses commissioned by SMEs to suit their particular needs
and conducted by training organizations /higher education
institutes or individual instructors.
-
The
subsidies cover direct course expenses only.
-
Courses
already funded by other Government support schemes (e.g. the
Skills Upgrading Scheme and the New Technology Training Scheme)
are not eligible for subsidies under the Scheme.
-
Participating
SMEs have to submit applications prior to the commencement of
the training courses. If approval-in-principle is granted to
an application, the amount of subsidy will be reimbursed to
the concerned SME after the relevant employers/employees have
completed the approved training courses.
|
|
Amount of subsidy
:
|
Part
1 : For each successful application, the subsidy will cover 50%
of the training expenses incurred. The maximum amount of subsidy,
on a cumulative basis, that each SME can obtain is $10,000.
Part
2 : For each successful application, the subsidy will cover 50%
of the expenses incurred. The maximum amount of subsidy, on a cumulative
basis, that each SME can obtain is $5,000.
|
| (IV)
Anticipated effectiveness of the funding scheme |
The
Committee estimates that, through the Scheme, about $600 million will
be spent on SMEs' employees training initiatives, and that employees
of at least 30 000 SMEs will benefit. In addition, another $200 million
will be spent on SME employers' training, benefiting employers of
at least 20 000 SMEs. |
SME
Export Marketing Fund
| (I)
Capital amount : |
$200million |
|
(II) Details
Objective :
|
To
encourage SMEs to participate in export marketing activities to
expand access to markets outside Hong Kong.
|
| Target
: |
Enterprises which are incorporated in Hong Kong and which meet the
definition of SMEs.
|
| Scope
: |
To subsidise SMEs' participation in export promotion activities
held locally or outside Hong Kong (including trade fairs and study
missions).
|
|
Procedures and criteria: |
-
Funding
will be provided to SMEs for participating in export promotion
activities within the ambit of the Scheme.
-
SMEs
should submit applications prior to the commencement of the
export promotion activities. If approval-in-principle is granted
to an application, the subsidy will be reimbursed to the concerned
SME after it has completed the approved export promotion activities.
|
| Amount
of subsidy : |
For each successful application, the subsidy will cover 50% of the
fundable items of the approved export promotion activities, or $10,000
(whichever is the less). Each SME can only receive subsidy once under
the Scheme. |
| (III)
Anticipated effectiveness of the funding scheme |
The Committee
estimates that, through this Scheme, about $400 million will be
spent on export promotion activities, benefitting at least 20 000
SMEs.
|
5.4
Table5-1 below shows the number of SMEs which will likely benefit from
the four funding schemes according to the level of funding recommended
by the Committee.
|
Table
5-1 : The capital amount of the four funding schemes and
the number of SMEs likely to benefit from the schemes
|
|
SME
Business Installations and Equipment Loan Guarantee Scheme
|
SME
Development Fund
|
SME
Training Fund
|
SME
Export Marketing Fund
|
Total
|
|
Capital
amount
|
$500
million
|
$200
million
|
Employees'
training(Note
9) : $300 million
Employers' training :
$100 million
|
$200
million
|
$1.3
billion(Note
10)
|
|
Maximum
amount per SME
|
$500,000
or 50% of the approved loan amount
|
$2
million per project
|
Employees'
training :
$10,000
Employers' training :
$5,000
|
$10,000
|
─
|
|
Minimum
no. of SMEs likely to benefit
|
6
600 SMEs(Note
7)
|
20
000 SMEs(Note
8)
|
Employees'
training :
30000SMEs
Employers' training :
20 000 SMEs
|
20
000 SMEs
|
96
600 SMEs(Note
11)
|
(Note
7) : On the assumption that the overall default rate of the Scheme
will be 15%, we can leverage on the capital amount of $500 million to
provide guarantees up to an amount of $3.3 billion. If so, the total
amount of loan facilities available will be at least $6.6 billion.
About 6 600 SMEs will benefit from the Scheme. If we assume that the average
size of a loan case is, say $0.7 million, which means that on average
the Government has to provide $0.35 million as guarantee per loan case,
then about 10 000 SMEs will benefit from the Scheme.
(Note
8) : If each successful applicant receives the maximum subsidy amount
of $2 million, then 100 projects will be funded. On the assumption that
a funded project would on average benefit 200 SMEs, 20 000 SMEs would
benefit from the Scheme.
(Note
9) : In his 2001-02 Budget, the Financial Secretary announced the
setting aside of $300 million for the establishment of a training fund
to subsidise SMEs' staff training initiatives.
(Note
10) : With the exception that $300 million has already been set aside
for subsidising SME's staff training initiatives (see
Note 9),
the resources available for implementing the other funding schemes will
depend on the actual amount to be recouped from the SFS. The Committee
recommends that, for the time being, the Government work on the basis
that $1 billion will be available.
(Note
11) : The figure is based on the assumption that there are no overlapping
of SMEs as beneficiaries among the various funding schemes.
Chapter
6 : Conclusion
Back
to Content
|
