55.     SMEs have always been a key part of our economy, representing 98 per cent of all business establishments in Hong Kong and employing 1.3 million people.  To help SMEs secure loans, expand access to markets outside Hong Kong, upgrade human resources and enhance their overall competitiveness, the Government introduced four SME funding schemes between late 2001 and early 2002.  These schemes have been well-received.  As at the end of February this year, the Trade and Industry Department had approved over 93 000 applications, and the resulting loans and grants have benefited more than 40 000 SMEs.  The provision for the four schemes will be depleted by the middle of this year.

56.     The SME Committee has completed a review of the schemes.  I have accepted its recommendation and will seek approval from the Finance Committee of this Council to provide additional funding of $300 million to the SME Export Marketing Fund and the SME Development Fund.  I will also transfer $200 million from the $1 billion SME Loan Guarantee Scheme to the two funds, bringing the total additional funding to $500 million.  Separately, we propose to reduce the assumed default rate under the scheme in order to raise the aggregate amount of guarantees.  These measures will extend the funds and the scheme to 2007, so that more SMEs can benefit.

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