Introduction

Background

Small and medium enterprises (SMEs) are the backbone of Hong Kong's economy, and the driving force of our economic development. They play an important role in the process of economic restructuring. SMEs comprise over 98% of business establishments in Hong Kong and employ about 50% of the working population in the private sector. The Government of the Hong Kong Special Administrative Region (HKSAR) attaches great importance to supporting Hong Kong's SMEs.

To support the SMEs to cope with economic developments, the Chief Executive, in his Policy Address in October 2001, accepted the Report on Support Measures for SMEs submitted to him by the SME Committee in June of the same year, and set aside $1.9 billion to establish four funding schemes with a total commitment of $7.5 billion to help SMEs rise to new challenges and opportunities.

The four funding schemes, which were set up in December 2001/January 2002, are:

Review of the SME Funding Schemes

In December 2002, the SME Committee completed a comprehensive review of the four SME funding schemes (please click here to read the review report). In gist, 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. It also considers that by suitably raising the ceilings of the guarantee/grant for individual SMEs, broadening the scope of individual schemes, extending the loan guarantee period, and rationalizing the application procedures, the funding schemes will address the needs of SMEs in the areas of financing, marketing, and manpower training more comprehensively and effectively. The HKSARG has accepted the SME Committee's recommendations in full. Improvement measures for individual schemes are summarised below.

Improvement Measures

- To increase the maximum amount of business installations and equipment loan guarantee per SME from $1 million to $2 million, and extend the guarantee period from three years to five years;

- To expand the scope of government guarantee to include two types of working capital loans:

(i) associated working capital loans offered to SMEs which have obtained a business installation and equipment loan guarantee; and

(ii) accounts receivable loans.

The maximum amount of guarantee is up to $1 million per SME for a maximum period of two years for each of the above two types of working capital loans.

Improvement measures for the BIG were effected on 31 March 2003. The BIG was renamed as SME Loan Guarantee Scheme (SGS) to reflect the expanded scope of government's loan guarantee under the scheme (SGS). Please visit the webpages of the SGS for further details.

- SME Development Fund (SDF)

This scheme provides financial support to projects proposed and carried out by eligible non-profit-distributing support organisations, trade and industrial organisations, professional bodies and research institutes which aim at enhancing the competitiveness of SMEs in general or SMEs in specific sectors. Having regard to the feedback of various parties, the SME Committee considers it not necessary to modify this scheme for the time being.

- SME Export Marketing Fund (EMF)

- To increase the maximum amount of grant per SME from $10,000 to $40,000. For each successful application, the maximum amount of grant will be 50% of the total approved expenditures incurred by the applicant for the relevant export promotion activity, or $20,000, whichever is the less.

Improvement measures for the EMF were effected on 24 February 2003. Please visit the webpages of the EMF for further details.

- SME Training Fund (STF)

- To increase the maximum amount of grant per SME from $15,000 to $30,000; and

- To allow SMEs to submit applications either before or after the commencement of the training courses. In the case of latter, SMEs have to submit applications not later than 30 days after the completion of the courses.

Improvement measures for the STF were effected on 24 February 2003.

Further Improvement Measures

To help SMEs rise to the challenges brought about by the Severe Acute Respiratory Syndrome (SARS) outbreak, the following improvement measures were implemented with effect from 23 June 2003:

(i) EMF
- Increase the maximum amount of grant an SME may receive from $40,000 to $80,000.
- Increase the maximum amount of grant for each successful application to $30,000 or 50% of the total expenditure on fundable items, whichever is the less.

(ii) STF
- Increase the subsidy level per successful application from 50% to 70% of the training expenses.

(iii) Subject to the total expenditure not exceeding $900 million, the resources of EMF, STF and SDF will be pooled together for more flexible deployment according to demand and take-up rate.

The maximum amount of guarantee/grant an SME may receive under the four SME funding schemes will be up to $4.11 million effective from 23 June 2003.

Review of SME Funding Schemes in 2005

In view of the exhaustion of the provisions for the four funding schemes by mid 2005, the SME Committee conducted a review on the four funding schemes in January 2005. Having considered the recommendations of the SME Committee, the HKSARG decided to implement the following changes:

1. lowering the SGS's assumed loan default rate from 15% to 7.5% and to re-deploy $200 million from the original expenditure earmarked under SGS to EMF and SDF;
2. consequent to (i) above, increasing the total loan guarantee commitment under SGS from $6.6 billion to $10.6 billion;
3. injecting an additional $300 million to EMF and SDF, thereby making up a total injection of $500 million;
4. removing the requirement from SMEs to obtain in-principle funding approval under EMF prior to participating in export promotion activities, and allowing SMEs to apply for EMF grants within 60 calendar days after their participation in the relevant export promotion activities; and
5. allowing STF to lapse.
   

Review of SME Funding Schemes in 2007

Based on the utilisation rates of the funding schemes, the approved commitments for SGS, EMF and SDF are expected to exhaust by early 2009. As the SME Committee considers that the funding schemes have met their objectives and are well received by the SMEs, the HKSARG has decided to continue the operation of these schemes. After considering how best to support SMEs, particularly those with operations in the Mainland, to meet various challenges arising from the Mainland's 11th Five Year Plan, and to address the needs of SMEs, including those in the service sector, the following changes are implemented with effect from 3 March 2008:

1. increasing the loan guarantee commitment under SGS from $10.6 billion to $12.6 billion and the maximum expenditure from $800 million to $950 million;
2. increasing the maximum amount of guarantee under SGS from $4 million to $6 million for each SME;
3. increasing the commitment of EMF and SDF from $1.4 billion to $1.75 billion;
4. increasing the maximum amount of grant under EMF from $80,000 to $100,000 for each SME; and
5. extending the scope of EMF to include advertisements on trade publications targeting export markets published by exhibition organisers.

Details of Funding Schemes

The details of individual funding schemes are as follows -

-SME Loan Guarantee Scheme
-SME Export Marketing Fund
-SME Training Fund
-SME Development Fund