SPEECH BY MR LEE YI SHYAN, MINISTER OF STATE FOR TRADE AND INDUSTRY AND MINISTER-IN-CHARGE OF ENTREPRENEURSHIP, AT THE OPENING OF THE BLUESKY FINANCE FAIR 2007 ORGANISED BY THE ACTION COMMUNITY FOR ENTREPRENEURSHIP (ACE) AT 9.10AM ON THURSDAY, 19 JULY 2007 AT ISLAND BALLROOM, SHANGRI-LA HOTEL
Members of the Financing Community,
Entrepreneurs,
Ladies and Gentlemen
Good morning
Finance Fair a Highlight of Blue Sky Festival
Today’s Finance Fair marks the start of the fourth Blue Sky Festival, organized by the Action Community for Entrepreneurship or ACE, and SPRING Singapore. For the past four years, ACE has been working extensively with both public and private sectors to address the needs of startups and SMEs. Going forward, we will continue with our efforts to promote a pro-business environment and enable enterprises to flourish and grow beyond our shores.
Reviewing SME Financing
A year ago, when I took over as Minister-in-Charge of Entrepreneurship and Chairman of ACE, a number of initiatives were already in place to encourage start-ups to form and help SMEs to grow - all thanks to the efforts of the private sector, working hand in hand with the Government. Through platforms such as ACE, red tape was cut, and rules and regulations were simplified or done away with altogether. The results have been encouraging. We are seeing more enterprises internationalizing their businesses. The SME financing scene has also improved significantly. Banks and financial institutions are now more supportive of SMEs and there are more financing sources and options available to SMEs.
SME ACCESS Loan was one such initiative. Launched by the ACE Finance Action Crucible and SPRING Singapore, and managed by DBS, SME loans are pooled together under this scheme and packaged as securities for sale to capital market investors. When the programme was completed in April 2006, it had successfully generated $100 million of loans and assisted some 400 SMEs. A significant number of these SMEs belonged to the under-served SME segment with little or no collateral or track record. According to DBS, the approval rates for the programme were also higher than for their other commercial loans as it was able to cater to SMEs with higher risk profile.
More significantly, the SME Access Loan indirectly catalyzed the generation of more unsecured lending to SMEs, as several other financial institutions came up with their own commercial financing products for this target market. This has enabled more smaller-sized SMEs with few assets to access financing as well.
The ACE Finance Action Crucible also explored with several private sector players and the relevant authorities on setting up an Over-The-Counter (OTC) platform, where shares of unlisted companies can be traded. It resulted in the launch of the OTC by Phillip Securities in July 2006. The OTC offers companies with high growth potential, but who are not ready for public listing yet, an avenue to access private equity financing. To date, two companies – Global Roam Group and Harry’s Holdings – have successfully raised $ 5.7 million of growth funds through the OTC. At least two more companies are in the pipeline and likely to be quoted by year end.
These are just two of the initiatives to improve SME financing. Other efforts are also reaping results, as confirmed by the SME Development Survey conducted by DP Information Group in 2006. Financing, although still of concern, is no longer the biggest impediment to business growth to our SMEs.
Financiers positioning themselves as SME partners
The improved SME financing scene is due in part to increased lending by our financial institutions as they increasingly recognize the SME banking as one of the fastest growing segments in the industry. It is no wonder that financial institutions are constantly developing innovative services to meet the financing needs of SMEs.
For example, some financial institutions have launched credit cards specifically targeted at SMEs to help them manage their cash flow more efficiently. Others offer concierge services that rival those for Platinum personal credit cards to woo this customer segment. In addition, some have dedicated SME branches with specially-trained managers to serve SMEs’ needs.
To further add value to SME customers, financial institutions also organize educational seminars on various topics ranging from new markets to best business practices. In addition, they work closely with business chambers, trade associations and government agencies to support various SME conferences and awards to recognize outstanding local enterprises and entrepreneurs.
Launch of Loan Insurance Scheme III
While financing for SMEs has improved significantly, the government will continue with efforts to further catalyze lending to SMEs. Today, I am pleased to announce a ‘new and improved’ third tranche of the Loan Insurance Scheme or LIS3.SPRING Singapore and IE Singapore launched the LIS scheme to help SMEs secure loans by bearing half the insurance premium, with the insurance covering 75% of the risk of non-payment (indemnity rate).The first tranche was piloted in 2002, and the second was extended in 2004 with improvements. Both have been highly successful and generated close to $280 million worth of loans.
One company which has successfully tapped on the Loan Insurance Scheme is Swanlin Asia, a specialist marine/offshore engineering services provider. Founded in late 2004, it began with a start-up capital of $200,000.The founders soon realized that it needed more funds to capitalize on the boom in the marine and offshore industry. They turned to Hong Leong Finance to tap on the Loan Insurance Scheme as well as the Enterprise Fund. The additional injection of funds enabled Swanlin to take on significantly more orders. Today, Swanlin employs over 500 staff and is one of the largest independent engineering companies in Singapore supporting two major rig builders in the world – Keppel FELS and SembCorp Marine.
SMEs can look forward to new enhancements in LIS3. These include a lower premium rate and a wider range of eligible SMEs, which are not covered by the Local Enterprise Finance Scheme, or LEFS, such as wholesalers, traders and distributors. The facilities covered include inventory financing, structured pre-delivery working capital, factoring, accounts receivables discounting and overseas working capital via standby letter of credit. We expect the new tranche to generate $3 billion worth of loans to SMEs over the next 4 years. Applications for LIS 3 will be open next month at participating financial institutions.
Deal Flow Connection goes private
Another ACE initiative that will see a change is the Deal Flow Connection. The Finance Action Crucible launched this online portal in 2003 to match SMEs with private investors through financial intermediaries. So far, more than 1,000 deals have been facilitated. Now that the Deal Flow Connection has been firmly established, it is timely to pass the management of the portal to a partner who can further the objective of providing SMEs access to alternative sources of financing. I am pleased to announce that after an extensive assessment, we have decided to hand the Deal Flow Connection over to DP Information Group. They have set up a booth here to showcase the new portal and I encourage you to visit them later to find out more.
How SMEs can attract investors
While we have in place various initiatives to support SMEs’ financing needs, SMEs themselves must also play their part in improving their chances of obtaining financing. Here are some things that SMEs can do: One, better financial housekeeping; two, greater transparency in the form of detailed financial documentation and a proper business plan; three, a stronger risk management culture; and four, improved management expertise and know-how. I will leave it to the speakers to cover more tips in today’s Finance Fair. I am sure you can learn from these experts and practitioners how to present your case to convince the banks and investors to provide you with the funds to grow and expand your enterprises.
In closing, the Public-Private Partnership model that ACE adopted had brought about efficient and effective financing solutions for SMEs. In the past 4 years, we saw the creation of many new financing initiatives like the Entrepreneurial Talent Development Fund, Over-The-Counter Trading platform, SME Access Loan, Business Angel Scheme, Internationalization Finance Scheme, Enterprise Fund, and today the Loan Insurance Scheme Tranche 3.Via the SME Access Loan and Over-the-Counter platform alone, we created more than $100 million worth of funds for SMEs within the last year. This is not including the many financing programmes which the private sector has come up with.
These achievements would not have been possible without a close working partnership between our financial institutions and government agencies such as SPRING and IE. My sincere thanks to them. I also want to take this opportunity to express our appreciation to Inderjit Singh, Chairman of the Finance Action Crucible and his committee members for their passion and faith in creating a sound financing market for Singapore. Your efforts have transformed the financing landscape to one of promise and hope for SMEs. Thank you!
Entrepreneurs,
Ladies and Gentlemen
Good morning
Finance Fair a Highlight of Blue Sky Festival
Today’s Finance Fair marks the start of the fourth Blue Sky Festival, organized by the Action Community for Entrepreneurship or ACE, and SPRING Singapore. For the past four years, ACE has been working extensively with both public and private sectors to address the needs of startups and SMEs. Going forward, we will continue with our efforts to promote a pro-business environment and enable enterprises to flourish and grow beyond our shores.
Reviewing SME Financing
A year ago, when I took over as Minister-in-Charge of Entrepreneurship and Chairman of ACE, a number of initiatives were already in place to encourage start-ups to form and help SMEs to grow - all thanks to the efforts of the private sector, working hand in hand with the Government. Through platforms such as ACE, red tape was cut, and rules and regulations were simplified or done away with altogether. The results have been encouraging. We are seeing more enterprises internationalizing their businesses. The SME financing scene has also improved significantly. Banks and financial institutions are now more supportive of SMEs and there are more financing sources and options available to SMEs.
SME ACCESS Loan was one such initiative. Launched by the ACE Finance Action Crucible and SPRING Singapore, and managed by DBS, SME loans are pooled together under this scheme and packaged as securities for sale to capital market investors. When the programme was completed in April 2006, it had successfully generated $100 million of loans and assisted some 400 SMEs. A significant number of these SMEs belonged to the under-served SME segment with little or no collateral or track record. According to DBS, the approval rates for the programme were also higher than for their other commercial loans as it was able to cater to SMEs with higher risk profile.
More significantly, the SME Access Loan indirectly catalyzed the generation of more unsecured lending to SMEs, as several other financial institutions came up with their own commercial financing products for this target market. This has enabled more smaller-sized SMEs with few assets to access financing as well.
The ACE Finance Action Crucible also explored with several private sector players and the relevant authorities on setting up an Over-The-Counter (OTC) platform, where shares of unlisted companies can be traded. It resulted in the launch of the OTC by Phillip Securities in July 2006. The OTC offers companies with high growth potential, but who are not ready for public listing yet, an avenue to access private equity financing. To date, two companies – Global Roam Group and Harry’s Holdings – have successfully raised $ 5.7 million of growth funds through the OTC. At least two more companies are in the pipeline and likely to be quoted by year end.
These are just two of the initiatives to improve SME financing. Other efforts are also reaping results, as confirmed by the SME Development Survey conducted by DP Information Group in 2006. Financing, although still of concern, is no longer the biggest impediment to business growth to our SMEs.
Financiers positioning themselves as SME partners
The improved SME financing scene is due in part to increased lending by our financial institutions as they increasingly recognize the SME banking as one of the fastest growing segments in the industry. It is no wonder that financial institutions are constantly developing innovative services to meet the financing needs of SMEs.
For example, some financial institutions have launched credit cards specifically targeted at SMEs to help them manage their cash flow more efficiently. Others offer concierge services that rival those for Platinum personal credit cards to woo this customer segment. In addition, some have dedicated SME branches with specially-trained managers to serve SMEs’ needs.
To further add value to SME customers, financial institutions also organize educational seminars on various topics ranging from new markets to best business practices. In addition, they work closely with business chambers, trade associations and government agencies to support various SME conferences and awards to recognize outstanding local enterprises and entrepreneurs.
Launch of Loan Insurance Scheme III
While financing for SMEs has improved significantly, the government will continue with efforts to further catalyze lending to SMEs. Today, I am pleased to announce a ‘new and improved’ third tranche of the Loan Insurance Scheme or LIS3.SPRING Singapore and IE Singapore launched the LIS scheme to help SMEs secure loans by bearing half the insurance premium, with the insurance covering 75% of the risk of non-payment (indemnity rate).The first tranche was piloted in 2002, and the second was extended in 2004 with improvements. Both have been highly successful and generated close to $280 million worth of loans.
One company which has successfully tapped on the Loan Insurance Scheme is Swanlin Asia, a specialist marine/offshore engineering services provider. Founded in late 2004, it began with a start-up capital of $200,000.The founders soon realized that it needed more funds to capitalize on the boom in the marine and offshore industry. They turned to Hong Leong Finance to tap on the Loan Insurance Scheme as well as the Enterprise Fund. The additional injection of funds enabled Swanlin to take on significantly more orders. Today, Swanlin employs over 500 staff and is one of the largest independent engineering companies in Singapore supporting two major rig builders in the world – Keppel FELS and SembCorp Marine.
SMEs can look forward to new enhancements in LIS3. These include a lower premium rate and a wider range of eligible SMEs, which are not covered by the Local Enterprise Finance Scheme, or LEFS, such as wholesalers, traders and distributors. The facilities covered include inventory financing, structured pre-delivery working capital, factoring, accounts receivables discounting and overseas working capital via standby letter of credit. We expect the new tranche to generate $3 billion worth of loans to SMEs over the next 4 years. Applications for LIS 3 will be open next month at participating financial institutions.
Deal Flow Connection goes private
Another ACE initiative that will see a change is the Deal Flow Connection. The Finance Action Crucible launched this online portal in 2003 to match SMEs with private investors through financial intermediaries. So far, more than 1,000 deals have been facilitated. Now that the Deal Flow Connection has been firmly established, it is timely to pass the management of the portal to a partner who can further the objective of providing SMEs access to alternative sources of financing. I am pleased to announce that after an extensive assessment, we have decided to hand the Deal Flow Connection over to DP Information Group. They have set up a booth here to showcase the new portal and I encourage you to visit them later to find out more.
How SMEs can attract investors
While we have in place various initiatives to support SMEs’ financing needs, SMEs themselves must also play their part in improving their chances of obtaining financing. Here are some things that SMEs can do: One, better financial housekeeping; two, greater transparency in the form of detailed financial documentation and a proper business plan; three, a stronger risk management culture; and four, improved management expertise and know-how. I will leave it to the speakers to cover more tips in today’s Finance Fair. I am sure you can learn from these experts and practitioners how to present your case to convince the banks and investors to provide you with the funds to grow and expand your enterprises.
In closing, the Public-Private Partnership model that ACE adopted had brought about efficient and effective financing solutions for SMEs. In the past 4 years, we saw the creation of many new financing initiatives like the Entrepreneurial Talent Development Fund, Over-The-Counter Trading platform, SME Access Loan, Business Angel Scheme, Internationalization Finance Scheme, Enterprise Fund, and today the Loan Insurance Scheme Tranche 3.Via the SME Access Loan and Over-the-Counter platform alone, we created more than $100 million worth of funds for SMEs within the last year. This is not including the many financing programmes which the private sector has come up with.
These achievements would not have been possible without a close working partnership between our financial institutions and government agencies such as SPRING and IE. My sincere thanks to them. I also want to take this opportunity to express our appreciation to Inderjit Singh, Chairman of the Finance Action Crucible and his committee members for their passion and faith in creating a sound financing market for Singapore. Your efforts have transformed the financing landscape to one of promise and hope for SMEs. Thank you!