Banks in Singapore are beefing up their services to small and medium enterprises (SMEs), with some boosting intra-regional advisory services in an effor to attract more SMEs.
This move comes as more local SMEs are expanding abroad to offset higher business costs caused by a tight labour market.
Local banks have been helping Singapore SMEs expand into the region over the past decade, but things have sped up in the past couple of years, precipitated by restructuring in the domestic economy. The trend has also opened up new opportunities for banks to raise their service levels to SMEs.
Says Linus Goh, head of Global Commercial Banking at OCBC, “Clearly, the recent measures on manpower and availability of space have significantly intensified the focus on cost and the need to accelerate the search for alternate operations. We know that about two-thirds of our SMEs already have some level of activity in the regional markets, so for them it is a case of shifting the balance of their activities a lot more into the region and perhaps less in Singapore.”
Linus continued, “Singapore remains very much headquarters for their operations, their R&D and their finance functions.”
OCBC, Singapore’s second largest lender by assets, said its SME loan book grew by about 20 per cent year-on-year in 2012, due to a strong doubling in loans the previous year.
“So at this time, as they are faced with pressures locally, we have beefed up significantly; for example, our coverage of the Iskandar market. We have seen a significant growth in the interest and demand for loans to facilitate customers shifting their operations into that market,” Linus said.
“We have also witnessed quite a significant scaling of capabilities and operations in China and Indonesia,” he added.
Banks like UOB are even providing clients with advisory and support services for entry into overseas markets. Eric Tham, head of Group Commercial Banking at UOB Bank said, “Over the last two years, we saw that SMEs are looking beyond just funding. So, we teamed up with government agenies, lawyers and accounting firms in providing an ecosystem where SMEs can approach us and get to know what they need to do in the process of moving offshore.”
Lim Chu Chong, head of SME Banking at DBS bank says, “We are working with customers closely to understand their needs and to offer the most appropriate financing solution. As an example, to venture in Iskandar, we understand that customers also require tax, accounting and licensing advice, so we are exploring ways to further assist them.”
SME bankers said companies shift abroad to gain access to manpower and for greater economies of scale in production.
Some of the favourite destinations that act as alternative operating bases for SMEs include China, Indonesia, Thailand and Malaysia.