Hong Kong Microfinance Pilot Scheme Approved

by Mary Swire, LawAndTax-News.com, Hong Kong

20 February 2012

The Hong Kong Mortgage Corporation Limited (HKMC) has announced that it has obtained approval to launch a microfinance pilot scheme with a trial period of three years, from mid-2012.

The scheme aims to assist people who may wish to start their own business or receive training for skill upgrading or certification, but cannot do so due to a lack of financial means, or difficulty in obtaining loans from traditional finance sources.

It has been said that a successful and sustainable microfinance scheme would provide comprehensive support to help boost the credit standing of borrowers, so that they could obtain bank loans at a relatively lower interest rate. Such a system would also assist borrowers, for example, to develop their business plans and provide entrepreneurial training.

A study group had recommended that a microfinance scheme in Hong Kong should be self-sustaining in the long-run; should not operate as a social welfare hand-out; and that borrowers must have the willingness to repay the loans. For micro-business start-up and self-employment, borrowers would need to present viable business plans; and borrowers should have the ability to implement those plans.

The Executive Director of the HKMC and the Deputy Chief Executive of the Hong Kong Monetary Authority, Peter Pang said: “The HKMC is in close discussions with different stakeholders on the details of the pilot scheme. A few banks and voluntary agencies have expressed their interest in taking part. We are preparing to launch the microfinance pilot scheme in mid-2012.”

According to the framework of the pilot scheme, it will cater to three categories of borrowers - those aspiring to start up their own businesses, those wishing to become self-employed, and those wanting to achieve self-enhancement through training, the upgrading of skills or securing professional certification.

The maximum loan amount for each loan in those categories will be HKD300,000 (USD38,700), HKD200,000 and HKD100,000 respectively. The maximum loan tenor will be five years. For loan tenors of up to three years, a repayment holiday of six months will be provided; and, for loan tenors of over three years and up to five years, a repayment holiday of 12 months will be applicable.

All borrowers would need to be Hong Kong residents, aged 18 or over, with no bankruptcy record and an acceptable credit history.

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