Hong Kong SME Credit Climate: Credit Approval Slightly Easier

The Hong Kong Monetary Authority (HKMA) published today (30 November) the results of Survey on Small and Medium-Sized Enterprises (SMEs)’ Credit Conditions for the third quarter of 2022.

Regarding SMEs’ perception of banks’ credit approval stance relative to 6 months ago, excluding respondents who answered “no idea / don’t know”, 84% perceived similar or easier credit approval stance in the third quarter of 2022, similar to 85% in the previous quarter (Chart 1 in the Annex). 15% perceived more difficult credit approval stance, same as that in the previous quarter. The perception of more difficult credit approval stance may not necessarily reflect actual difficulties faced by SMEs in obtaining bank credit as the perception could be affected by a number of factors, such as media/news reports, business conditions and opinions of relatives and friends.

Of respondents with existing credit lines, 88% reported that banks’ stance on existing credit lines was easier or unchanged in the third quarter of 2022, compared with 93% in the previous quarter (Chart 2 in the Annex). 12% of the respondents reported tighter banks’ stance on existing credit lines, compared with 7% in the previous quarter. In this survey, tighter stance on existing credit lines denotes a range of possible measures or arrangements, such as reducing unused and used credit lines, raising the interest rate, imposing additional collateral requirements, or shortening loan tenor. Therefore, respondents’ indication of banks’ stance on existing credit lines may not directly reflect banks’ supply of credit to SMEs.

The survey also gauged the results of new credit applications from SMEs. 4% of the respondents reported that they had applied for new bank credit during the third quarter of 2022. Among the respondents who had already known their application outcomes, 88% reported fully or partially successful applications, compared with 86% in the previous quarter (Chart 3 in the Annex). 12% reported unsuccessful applications, compared with 14% in the previous quarter.

Owing to small sample sizes of SMEs with existing credit lines (18% of surveyed SMEs) and with new credit applications (4% of surveyed SMEs) during the quarter, the results could be prone to large fluctuations, and hence should be interpreted with care.