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P2P Lending – A “Plan B” to SME Lending in Singapore

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During the Global Financial crisis, SMEs that had difficulties securing bank financing might attribute their plight to the severe systemic credit crunch then.

Fast forward to today, where the world is flushed with excess liquidity from the massive printing of money by central banks (i.e. quantitative easing), one would imagine that our SMEs should have an easier task in getting bank loans for their businesses.

But, surprisingly, that is not the case!

In his recent thought-provoking article, “The $6b question: Will govt funds help SMEs to do better?”, Managing Editor of The Straits Times, Mr Han Fook Kwang, revealed that one area where SMEs “need more help in is access to cheap loans to fund business plans”.

Why is this still happening despite the Singapore government helping banks co-share 50% of the lending risk?

Well, because “there are principles surrounding bank lending that will not change”. Bank credit officers have to follow a strict set of lending criteria or risk losing their jobs.

Any Plan B?

Yes! In fact, during the economic downturn in 2009, the Singapore Business Federation (SBF) already got its member businesses to lend to one another when the banks won’t lend!

Isn’t that P2P lending?