Additional aid: Financial Secretary John Tsang and Secretary for Commerce & Economic Development Rita Lau brief reporters on the Government's increased assistance for SMEs.

A special SME loan guarantee scheme will be launched to help small and medium-sized enterprises weather the financial crisis. The Export Credit Insurance Corporation will also introduce enhanced measures.

Speaking to reporters this afternoon Financial Secretary John Tsang said the Government is highly concerned about the difficulties faced by SMEs with the present liquidity crunch.

He hopes the measures will give SMEs more flexibility and convenience in obtaining necessary cash flow to maintain their operation and develop new markets.

Scheme details

Secretary for Commerce & Economic Development Rita Lau said the scheme will provide $10 billion in liquidity to the commercial lending market for SMEs.

The Government will provide a 70% guarantee to the loans granted by the participating lending institutions and its guarantee commitment will be $7 billion. The maximum amount of loan each SME can obtain from a participating lending institution is $1 million.

Within the maximum amount of $1 million credit facility for each SME, up to $500,000 can be used as revolving credit. The Government's guarantee ceiling for this revolving credit facility will continue to be 70%.

A six-month repayment grace period will be provided to borrowers during which they can pay back the interest only. Thereafter the loan will be repaid over a maximum of 24 months.

Application criteria

All SMEs which have been registered in Hong Kong for one year or more, regardless of their industry or business types, are eligible to apply. Application is open for six months starting from the implementation date.

Subject to the Finance Committee's approval, the proposed scheme is expected to come into operation in December.

Mrs Lau said the Export Credit Insurance Corporation will increase the cover within the bounds of prudent credit assessment and risk management.

Increased cover

It will provide more country cover for six emerging markets - the United Arab Emirates, Kuwait, Chile, Brazil, the Czech Republic and Malaysia. The premium rates for these markets will be lowered.

The processing time for applications for small credit limit of $500,000 or below will be shortened to two to three days upon the receipt of adequate information.

The Government will propose a resolution by the Legislative Council to increase the Statutory Maximum Liability from $15 billion to $30 billion.