Despite slowdown, new SME credit increases fourfold

Although the local economy recorded slight negative growth last year, the city’s banks posted a notable 68 per cent increase in newly approved credit for the small and medium enterprises (SMEs) here as many of them were still active in expanding their existing businesses and setting up new companies, the latest Monetary Research Bulletin released by the Monetary Authority of Macau (AMCM) shows.
In 2014, some MOP48.5 billion (US$6.2 billion) in new credit was approved for SMEs, representing a year-on-year increase of 68.1 per cent – a growth pace that further accelerated from the 53.5 per cent of 2013, according to credit figures released by the Authority.
Of this newly approved credit of MOP48.5 billion last year, about 52 per cent or MOP25 billion was used for SMEs’ existing business expansion, the bulletin noted.
In the first half of last year, the credit approved for small companies’ business expansion accounted for 69 per cent of all newly approved loans; although this percentage shrunk to only 36.1 per cent in the second half of the year.
Meanwhile, the city’s approved credit for newly established companies last year, which stood at MOP2.73 billion, grew by about 13.8 per cent compared to the previous year, according to AMCM research.
Most of the credit approved for the newly established SMEs here was concentrated in the second half of last year at MOP2.14 billion, an almost four times leap from the first half and representing a surge of 186 per cent when compared to the same period in 2013.
Deliquent loans As at the end of last year, the SME loans to construction and public works stood at MOP15.7 billion, occupying about 26 per cent of the city’s overall SME outstanding loans at MOP60 billion; the second and third largest economic sectors to which SME loans were extended were the wholesale and retail trade and manufacturing, accounting for 24 per cent and 5.3 per cent, respectively.
Loans to local SMEs also increased significantly in the city’s commercial loan businesses.
As at end-2014, the share of SME loans accounted for over 40 per cent of Macau’s total domestic corporate loans, a further increase from the share seen at over 35 per cent in the same period the previous year.
The amount of delinquent loans – SME loans overdue for more than 3 months – was MOP131.1 million as at the end of 2014, with a corresponding delinquency ratio of 0.22 per cent.
While the banks saw fast growth in the credit approved for SMEs, only a moderate increase was registered in the collateralised ratio.
As at the end of 2014, the collateralised ratio for SME loans stood at 82.08 per cent, up 4.39 percentage points when compared to the same period the previous year.
‘Poor credibility’ major reason
for bank rejections In its report on the credit approved for local small and medium enterprises (SMEs) last year, the Monetary Authority of Macau (AMCM) said 41.1 per cent of the surveyed banks cited ‘poor credibility’ as a major reason for rejecting applications for credit during the second half of last year. Some 37.9 per cent of the surveyed banks said ‘lack of sound management’ was another major factor for banks turning down credit applications; while the absence of standard accounting systems and lack of transparency was the third major consideration for banks when deciding not to advance loans to SMEs, according to AMCM research.
Outstanding loans under government credit scheme
for SMEs The outstanding balance of loans under the government’s ‘SME Credit Guarantee Scheme’ and ‘SME Credit Guarantee Scheme Designated for Special Projects’ was MOP353.4 million in total as at the end of 2014, some 11.9 per cent less than the same period in 2013. The outstanding loans as guaranteed by the government for SMEs’ credit accounted for only a small share at 0.6 per cent of total SME loans outstanding, according to AMCM.