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Rule changes mean bigger customer reach for three finance firms

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S'pore's three listed finance firms set to benefit

Singapore's three listed finance firms are poised to reap benefits from regulatory changes that will boost their customer reach and capacity to lend.

Already, Hong Leong Finance, Sing Investments & Finance and Singapura Finance have enjoyed hefty run-ups in share prices.

The Monetary Authority of Singapore announced two weeks ago that rules governing the sector - a group of the three firms - will be relaxed.

The firms will eventually be able to offer uncollateralised loans of up to 25 per cent of capital funds, with a cap of 0.5 per cent of capital funds for uncollateralised loans to every single borrower. Current rules limit total uncollateralised loans to 10 per cent of capital funds, while loans to a single borrower are capped at $5,000.

Another change is to let them offer current accounts and chequeing services.

Finance firms offer savings and fixed deposit services, and loans. Small- and medium-sized enterprises (SMEs) are major customers. The trio commanded almost $7 billion in outstanding SME loans as of the second quarter of last year.

Last Friday, as Hong Leong Finance unveiled its full-year results, chairman Kwek Leng Beng stressed a focus on SMEs in growth sectors.

"More accessible funding options will be made available to them...," he said.

About half of Singapura Finance's loans are to SMEs.

The new rules mean it can deepen its presence by entering the uncollateralised loans business, chief executive Jamie Teo said, adding: "We are still exploring strategies... but we want to support companies in need of capital and make sure SMEs remain our key growth driver."

But he is realistic and said 25 per cent of its capital funds will be a maximum of $60 million, which is less than 10 per cent of its total loans, and "the business impact is not exactly strong".

Sing Investments & Finance offers no uncollateralised loans now. Calculation suggests it will have about $80 million more on its loan book if it fully taps the 25 per cent cap - or 4 per cent of its total loans last year.