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Hong Kong economy
Hong KongHong Kong Economy

Exclusive | Struggling Hong Kong SMEs’ defaults surge six-fold to HK$2.46 billion on loans guaranteed by government in 2022

  • Most have been servicing interest so far, dread having to start repaying on principal sum borrowed
  • Government urged to extend holiday for repaying principal sum, or ‘default rate could rise dangerously’

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SMEs struggled during the pandemic as many stayed away from malls and businesses because of social-distancing measures. Photo: May Tse
Kahon Chan
A Hong Kong government-guaranteed loan scheme to help small and medium-sized enterprises (SMEs) weather the Covid-19 pandemic saw repayment defaults surge six-fold to HK$2.46 billion (US$313 million) last year from 2021, with worse expected.

There were HK$970 million loans in default in the first two months of this year, almost two-fifths the total last year and more than double 2021’s HK$420 million, a Post review of government replies to the Legislative Council’s Finance Committee earlier this month found.

Borrowers have urged the government to extend the holiday period for repaying the principal sum of their loans, or many more companies could be in trouble.

The Special 100% Loan Guarantee Scheme was introduced in April 2020 to ease SMEs’ liquidity crunch during the economic slump brought on by the pandemic, with the government guaranteeing lending by banks.

Hong Kong Chinese Manufacturers’ Association president Allen Shi. Photo: Sam Tsang
Hong Kong Chinese Manufacturers’ Association president Allen Shi. Photo: Sam Tsang

It allowed each SME in Hong Kong to borrow up to HK$9 million at an interest rate of the prime rate minus 2.5 per cent, or at 3.375 per cent. Borrowers could opt to delay repaying the principal sum, with a holiday period of up to 42 months.

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