Hong Kong budget: finance chief announces unprecedented government-backed loan scheme for the unemployed
- The low-interest loans will be available to Hongkongers who found themselves out of work for at least two months last year as the coronavirus devastated the city’s economy
- The government will also earmark another HK$6.6 billion to create some 30,000 fixed-contract jobs
With the city’s unemployment rate at a near-record high of 7 per cent, the government is also set to spend another HK$6.6 billion (US$851 million) to create around 30,000 fixed-contract jobs, but the city’s unions have declined to endorse either proposal.
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Individuals who can prove to a bank that they were employed for at least three months after January 2020, but then lost their jobs for at least two months, can apply for the loans. Freelancers who can provide proof that they lost income are also eligible.
The loan is capped at either six times an applicant’s previous monthly salary, or HK$80,000, whichever is lower, and only 1 per cent annual interest will be charged over five years.
Successful applicants would only have to make interest payments for the first year, with the principal to be repaid over no more than four years. Those who repay the loans in full on schedule will be reimbursed for all the interest they paid.
A government source estimated that more than 180,000 people would be eligible for the scheme, which could kick off as early as April if it was approved by the Legislative Council’s Finance Committee.
The source added that banks would not refer to applicants’ past credit records when approving the loans, even though it was estimated that the bad debt rate could be higher than normal.
“But failing to pay back the loans would affect a person’s credit record, and we do not rule out suing for bankruptcy, although we believe such chances are low,” the source added.
In previous budgets, similar measures had been reserved for small and medium-sized enterprises, with the rates for bad debt below 1 per cent – far lower than the estimated 25 per cent.
Chan also rejected in his speech on Wednesday calls from unions to set up “temporary unemployment assistance”.
“The government has reiterated the policy considerations it has taken into account for not accepting the proposal,” he said, adding that the loan scheme would provide an extra financing option for the unemployed.
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Apart from the loans, the government also proposed allocating a further HK$6.6 billion to create around 30,000 additional jobs with fixed contracts lasting up to 12 months. However, the details of the jobs have yet to be announced by the Civil Service Bureau.
A similar plan was first launched last year, when the government earmarked HK$6 billion to create 31,000 jobs in the public and private sectors over two years. As of the end of January, some 16,000 appointments had been made.
Mung Siu-tat, chief executive of the Confederation of Trade Unions, said he was very dissatisfied with the budget, saying it would do little to help the jobless.
“The government is actually inviting low-income people to borrow money without considering their ability to pay it back. It’s just an irresponsible and useless scheme,” he said. “When you are already jobless, how can you pay back the loans?”
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Mung also accused the government of not offering enough financial assistance or job opportunities for the unemployed, as the budget offered only temporary positions, some of which required special skills and work on the mainland.
The employee representative of the Labour Advisory Board, Bill Tang Ka-piu, said although some people appeared interested in the new scheme, he would still prefer the government provided concrete financial assistance for the workers.
“The loan can serve as an extra option, but I believe most families would rather apply for Comprehensive Social Security Assistance when they have no way out, instead of applying for a loan,” he said.
Tang, also a representative of the Federation of Trade Unions, said he was disappointed that the government had turned down their proposal to offer unemployment assistance, and urged the finance chief to allocate more funding for assisting the jobless during difficult times.
