Unemployed Hongkongers to be offered low-interest loans of up HK$80,000 guaranteed by government for first time
- The government is offering to guarantee low-interest personal loans for unemployed people, with the city’s jobless rate at a 17-year high
- The interest rate is just 1 per cent, and borrowers can get a full refund of the interest paid after the loan is fully repaid
The 10 participating banks initially include HSBC, Hang Seng Bank and Bank of China (Hong Kong), with two more joining in May.
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“Hong Kong’s economy has been hard hit by the Covid-19, and the labour market faces severe challenges,” said Financial Secretary Paul Chan Mo-po in the statement from HKMC.
“This scheme aims to provide a supplementary financing option to individuals suffering from cessation of main recurrent incomes, to help them tide over the interim difficulty.”
Borrowers can opt for a repayment period of up to six years. They will need to pay a fixed interest rate of 1 per cent per year and can choose to repay only interest in the first 12 months. They can get a full refund of the interest paid after the loan is fully repaid, according to HKMC’s statement.
Under the scheme, the government is offering a 100 per cent guarantee, so if the borrowers default it will repay the loans in full. This allows the banks not to worry about bad debt risks.
The government last year offered similar guaranteed loans for small- and medium-sized enterprises of up to HK$4 million. This is the first time it has been offered to jobless people, who usually cannot secure bank lending after losing their income.
The new measures would be helpful to the unemployed but it has come too late, said Bill Tang Ka-piu, employee representative of the Labour Advisory Board.
“Many people who have been unemployed for more than a year have been relying on their credit card or other high-interest lending to support themselves. The low interest-rate loan may help them to repay their credit card debts, but if it had been launched earlier, it would be more helpful,” Tang said.
“The government should offer unemployment benefits to the jobless instead of just helping them to get a bank loan.”
The measure was first announced in the financial secretary’s budget speech in February. The pandemic has ravaged a range of industries including tourism, catering and airlines, causing almost unprecedented job losses.
Hong Kong’s unemployment rate stood at 6.8 per cent in the first quarter of this year, slightly lower than the fourth quarter but still a 17-year high. In the food and drinks sector specifically it was 13.3 per cent.
“HSBC welcomes this special measure introduced by the government to provide an extra financing option for individuals with employment challenges due to the Covid pandemic,” said Maggie Ng, head of wealth and personal banking for Hong Kong at HSBC. “As one of the largest banks in Hong Kong, we are making every effort to assist customers during the current tough time, just like how we have stood by each other over the past 156 years.”
