LCQ9: Export credit insurance support for small and medium enterprises
The Hong Kong Export Credit Insurance Corporation (HKECIC) has rolled out a number of export credit insurance measures since 2020 to support small and medium enterprises (SMEs) in facing the challenges arising from the epidemic. In this connection, will the Government inform this Council if it knows:
(1) the number of credit limits which have been uplifted, and the cumulative amount of goods for which protection is provided, since the launch of the "100% Credit Limit Top-Up Scheme"; whether the HKECIC will further extend the Scheme or regularise it; if so, of the details; if not, the reasons for that;
(2) whether the HKECIC will further extend the 10 support measures which were launched on April 9, 2020; if so, of the details; if not, the reasons for that; the respective up-to-date numbers of enterprises benefitting from the measures of free pre-shipment cover and credit limit uplift, and the uplifted credit limits involved;
(3) the respective up-to-date numbers of applications received and approved by the HKECIC under the "Export Credit Guarantee Programme", and the average guarantee amount of each approved application;
(4) the up-to-date number of enterprises which have been provided with the service of Self-Underwritten Policy by the HKECIC through "EC-Reach 2.0", an online self-service platform for SMEs, and the credit limits involved;
(5) when the HKECIC will introduce the "Flexible Indemnity Ratio" arrangements to automatically increase credit limits for policyholders whose credit limits are not fully approved; and
(6) whether the HKECIC will introduce other support measures in the coming 12 months; if so, of the details?
Since June 2018, the Hong Kong Export Credit Insurance Corporation (ECIC) has, in response to the escalating China-United States (US) trade conflict, taken the lead to launch a series of supportive measures for "Small Business Policy" (Note 1) (SBP) holders affected by US tariff measures. The outbreak of the COVID-19 pandemic has triggered global supply chain bottlenecks, leading to a drastic increase in trading costs for exporters. Against this backdrop, apart from further expanding and strengthening existing coverage to the trade, the ECIC also rolled out various new measures aiming to alleviate risks and financial burden of policyholders, so as to better support Hong Kong exporters in the face of credit risks and to seize business opportunities brought by our country's sustained export and import development.
As regards the six parts of the question raised by the Hon Jimmy Ng, my consolidated reply in relation to the ECIC's concrete supportive measures is as follows:
(1) Since 2018, the ECIC has launched 10 supportive measures to support Hong Kong exporters. Among these, the following measures are tailored for SBP holders:
(i) free pre-shipment cover in all ECIC's insured markets for buyers approved for such cover;
(ii) 20 per cent uplift in all valid buyers' credit limits, covering all ECIC's insured markets at a cap of $5 million;
(iii) premium payment due date extended for one month; and
(iv) premium discount for each SBP holder increased from 30 per cent to 50 per cent.
The supportive measures for all policyholders are as follows:
(v) waiver of annual policy fee;
(vi) across-the-board payment term of 120 days for all approved buyers' credit limits;
(vii) waiver of additional premium charged to policyholders for buyers' extension/change of payment term;
(viii) expedited claims settlement process involving amount up to $1 million; claims payment will be made within five days upon receipt of relevant documents;
(ix) simplified procedures and flexibility in processing claims cases of payment difficulty; and
(x) 10 additional free credit check facilities.
As at end-May 2022, around 1 300 and 1 800 policyholders have benefitted from free pre-shipment cover and increased credit limits respectively, amounting to over 9 000 credit limits uplifted and $1.34 billion of additional credit limits. More than 900 policyholders have also enjoyed extended premium payment due date and additional premium discount respectively, with the additional discounts amounting to $11 million. Furthermore, around 2 600 policyholders have received waiver of the annual policy fee and more than 2 500 policyholders benefitted from extension of payment term to 120 days.
(2) "100% Credit Limit Top-Up Scheme"
To provide further support to exporters in seizing post-pandemic business opportunities, the ECIC launched the "100% Credit Limit Top-Up Scheme" (the Scheme) in June 2020, proactively uplifting the credit limits of its current policyholders to support the export sector in the face of credit risks. As at end-May 2022, over 13 500 credit limits have been uplifted under the Scheme, benefitting more than 1 800 exporters and providing protection for a cumulative amount of about $23 billion of shipments.
Geopolitical tension and the pandemic have caused instability to the current external economic environment, and the level of credit risks remains high. The ECIC has already further extended the validity period of the 10 aforementioned supportive measures and extended the Scheme for the fourth time, both to December 31, 2022, in order to continue supporting exporters in exploring worldwide markets with confidence.
(3) New Initiatives in 2021 Policy Address
The ECIC has been implementing the three new initiatives introduced in the 2021 Policy Address in an orderly manner. These include EC-Reach 2.0, the Export Credit Guarantee Programme (the Programme) and the "Flexible Indemnity Ratio" arrangement. Details of the progress are as follows:
(i) The ECIC launched in December last year, as scheduled, the upgraded online self-service platform for small and medium enterprises (SMEs), EC-Reach 2.0, simplifying and expediting application approvals, so as to provide exporters with more flexibility in taking out insurance cover. As at end-May 2022, the ECIC has processed about 60 applications submitted via the online platform. The ECIC will transfer over 1 400 "Online Micro-Business Policy" (Note 2) and SBP holders to EC-Reach 2.0 later this year, facilitating more policyholders in making use of the enhanced online platform.
(ii) The Programme was launched in March this year as scheduled, providing guarantee up to 70 per cent of the export financing of the ECIC's policyholders at a maximum guarantee limit of $50 million, thereby enhancing banks' confidence in granting loan facilities to SMEs. After the launch of the Programme, the ECIC has immediately written to respective local chambers of commerce, SME associations, around 40 banks and all of its policyholders. In addition to collaborating with organisations such as the Trade and Industry Department in joining and organising webinars, the ECIC has stepped up promotional efforts through different channels including social media platforms, online and railway stations advertisements. The ECIC has since received positive feedback from most banks active in trade finance for SMEs, as well as about 60 enquiries regarding operational details and application for the Programme. At present, two banks have already signed agreements with the ECIC to join the Programme, while other banks are examining relevant legal documents. The ECIC will continue to maintain close liaison with the banks proactively, whilst answering the trade's enquiries concerning details of the Programme.
(iii) The ECIC plans to implement the "Flexible Indemnity Ratio" arrangement in the third quarter of this year. Policyholders whose credit limit applications are not fully approved may, according to their needs, automatically increase credit limits up to $5 million, thus strengthening the insurance coverage to exporters under different risk situations. The ECIC will announce the relevant details in due course.
The ECIC will continue to uphold the principle of operating on a self-sufficient basis, ensure effective and professional risk management, provide timely and appropriate supportive measures, and actively respond to the needs of the trade.
Note 1: The "Small Business Policy" is applicable to Hong Kong exporting companies with an annual turnover of less than $50 million.
Note 2: The "Online Micro-Business Policy" is tailored for Hong Kong exporters with an annual turnover of less than $20 million.
Ends/Wednesday, June 22, 2022
Issued at HKT 15:00
Issued at HKT 15:00