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Bad debts blamed on failure to monitor scheme

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Lawmakers accused officials yesterday of failing to monitor a $2.5 billion loan scheme designed to help small and medium-sized enterprises (SMEs) that until last month had a 9.5 per cent default repayment rate.

Of the 68 banks that had taken part in the scheme - launched in 1998 and which stopped taking applications in April last year - 75 per cent reported bad debts on the loans. The Government has paid $258 million in compensation.

The scheme was originally set up to help SMEs with short-term liquidity problems.

Under the plan, the Government gave a 50 per cent - later raised to 70 per cent - repayment guarantee for two years, with each loan's limit capped at $2 million.

After asking a question about the effectiveness of the scheme, industrial sector representative Lui Ming-wah said officials had failed to monitor the scheme properly.

'Among the 68 banks, more than half have reported bad debts of higher than 10 per cent. This is a very serious problem. Why is the default rate so high? Is it because of a failure in monitoring?' he asked.

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