Exclusive | Hong Kong’s struggling small businesses may soon find it easier to get bank loans, thanks to HKMA’s new data platform
- The Commercial Data Interchange will allow banks to make quick and easy decisions about lending to SMEs, says HKMA chief executive Eddie Yue Wai-man
- Yue, who will mark his third anniversary at the helm of Hong Kong’s de facto central bank on Saturday, has been a keen promoter of fintech
The banks who join the scheme can access the information they need to determine the creditworthiness of the SME via the data provider.
“Data is extremely important in the next phase of fintech development,” Yue said in an interview with the Post.
The HKMA has run pilot programmes for the platform since November last year. So far 800 loan applications worth HK$1.6 billion (US$203.82 million) have been approved by banks with access to the SMEs’ credit worthiness through the commercial data made available.
Yue gave the example of a small mask factory in Hong Kong. The owners wanted to ramp up production when they saw the emergence of the Omicron variant at the beginning of the year in different parts of the world.
“There was an urgent demand for masks, and they wanted to meet it by adding another operation line but they could not get the loan,” he said.
The factory allowed its bank to access the necessary records via Tradelink, a company that stores the trade-related documents of many SMEs when they buy materials or export their products to clients.
The lender was able to assess the business profitability of the mask company without wading through mountains of financial statements and examining collateral.
“The mask factory got the loan in just one week and at quite a cheap rate. That allowed them to respond quickly to the market demand for masks arising from Omicron,” said Yue.
The HKMA has also been working with the People’s Bank of China and counterparts in Thailand and the United Arab Emirates on project “mBridge” to establish a settlement platform for central bank digital currencies.
“We have done the pilot. It shows that cross-border payments can be done through this new platform in a much cheaper and faster way,” said Yue. “It does not have to take days, but merely seconds through this platform, with transaction costs cut by half.”
Yue took over as HKMA’s chief executive in October 2019 from Norman Chan Tak-lam, who retired. He has been with the HKMA since its set up in 1993.
His tenure has been full of challenges, starting with the social unrest of 2019 which gave way to the coronavirus pandemic and the interest rate rises that are troubling investors this year.
Social distancing requirements during the pandemic have pushed the public to use digital banking. Some 1.6 million virtual bank accounts are now open, with HK$25 billion in deposits and HK$11 billion of loans.
About 43 per cent of new individual bank accounts were opened online, as opposed to in-person, in the first half of the year, compared with just 17 per cent three years ago. Just over a fifth of SMEs opened online bank accounts this year, compared with only 1 per cent in 2019.
“The next challenge for the virtual banks is to really map out their path to profitability in their business plans. They are looking at five years time to get to profitability,” said Yue. “We still want to monitor the progress of this first batch before thinking about whether to award the second batch of licences.”
This is vital because three years of tough quarantine measures prompted an exodus of professionals, while some firms relocated. Yue is confident they will be back now the city has relaxed its quarantine rules.
“In the next few years, we will make the best use of these opportunities to attract the talent and financial institutions to come to Hong Kong,” he said.