COS 2013 – SME Bank and Renewable Energy

Committee of Supply Cuts by YJJ on Ministry of Trade and Industry

SME Bank

The service economy is increasingly important to Singapore. Excluding Financial and Insurance, the service sector had 135,000 enterprises and employed 1.35 million workers in 2010.

The 2012 SME Development Survey highlighted that 50% more service sector SMEs found bank financing a challenge compared to the previous year. This is despite the availability of government-backed loans through financial institutions. The survey also found more SMEs facing cash flow problems and worsening liquidity.

Service sector SMEs generally require working capital financing such as supplier invoice financing, working capital term loans and factoring. They are generally asset light with little collaterals. Financial institutions are cautious and tend to make unsecured lending only to bigger mid-sized SMEs. With the Basel III minimum adequacy requirement, banks are likely to tighten loans to smaller and riskier SMEs.

Government lending to SMEs has been implemented in countries such as USA, South Korea and Malaysia to address market failure in working capital financing loans to SMEs.  A government-led SME bank will be useful for the following:

(1)  SMEs with track record of less than 3 years. SMEs have highlighted that banks generally offer financing to SMEs with more than 3 years of track record.

(2) SMEs with small scale operations. Financial institutions tend to focus on mid-sized enterprises.

(3) SMEs with intangible assets. Many knowledge or technology-based companies have intangible intellectual properties which banks are unable to assess. I understand there was previously a government backed unsecured loans to tech start-ups through the now defunct Keppel-Tat Lee Bank called TechFinancing. Is the government supporting more of such schemes?


To alleviate concern that the SME bank will crowd out private sector lenders, the SME bank can be a lender of last resort to the under-served small SMEs.  Alternatively, the government can form tighter partnerships with existing financial institutions to serve this market.


Renewable Energy

It has been some years since the government identified the clean energy as a key economic growth area. Since 2007, the government has invested $350 million to fund the development, testing and export of clean energy solutions. By 2015, the government expects the clean energy industry to contribute $1.7 billion to Singapore’s GDP and employ around 7,000 people [1]. It is now 2013. How far are we from this target? We have a dozen tidal, wind, and solar energy MNCs setting up largely R&D facilities here [2], but how many sizeable Singapore enterprises have sprung up to spearhead clean energy solutions export?


Solar power currently represents just 0.1% of electricity generating capacity in Singapore. [3] This is very low and could be the reason why local enterprises have not taken off. We are too focused on development and testing. Germany is the global leader in the solar energy production. The German solar energy industry was enabled not just by R&D but also lessons learned in system adoption and use because of the aggressive promotion of the alternative energy market.


Solar energy capability is not just about producing and exporting panels. Clean energy solutions is a post-industrial service industry where hardware and software have to be coupled with customization and after-sales service. Without a sizeable local deployment, it would be very difficult for Singapore to export our clean energy solutions expertise.


Currently, we only have two small scale schemes for private companies, one to encourage test bedding in government facilities and the other to offset the capital costs of installation. [4] We need to scale up system adoption and use in the private sector to develop the industry and make the market.


I propose the government look into three possibilities. One, Feed-In Tariffs for solar energy producers selling their electricity back to the grid on long-term guaranteed contract at a slightly marked-up price. Two, Rooftop Leasing to encourage building owners to lease out their rooftops to solar energy companies to produce electricity. Three, Solar Leasing to encourage building owners to rent panels from solar energy companies.


The government has said that it is not fair to subsidize electricity generation producers. [5] However, the government provides funding and subsidies in many creative forms to develop promising industries. In the case of these solar energy schemes, MTI should study its viability and release the findings to the public. I think it is time to experiment with solar leasing, rooftop leasing and FITs to study viability.




[3] According to the Energy Market Authority, there are 120 commercial and 36 household PV installations with 5.55 MWp (megawatts peak) capacity at end 2011 ( Conventional electricity generating capacity stands at 9,892 MW at end March 2012 (

[4] The first is the S$17 million Clean Energy Research & Testbedding Programme (CERT). The programme provides opportunities for government agencies to partner private companies to develop and testbed clean energy applications and solutions using government facilities in Singapore. The second is the S$20 million Solar Capability Scheme, which was launched in 2008 to help companies offset part of the capital costs of installing solar technologies in new building projects.



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