Hong Kong is home to nearly 360,000 small and medium-sized enterprises (SMEs) which form a vital pillar of our economic development. In the 2025 Policy Address, the Chief Executive announced a series of measures to strengthen support for SMEs amid economic restructuring, including a two-year extension of the application period for the 80% Guarantee Product under the SME Financing Guarantee Scheme (SFGS) and a further one-year extension of the principal moratorium arrangement. HKMC Insurance Limited (HKMCI) 1, which is responsible for implementing and administering the SFGS, has completed the preparatory work with participating lending institutions and launched the relevant new measures in November.
The application periods for the 80% and 90% Guarantee Products under the SFGS will end on 31 March 2028 and 31 March 2026 respectively. As at the end of November 2025, these two products have benefited around 25,000 enterprises and around 400,000 employees. Borrowing enterprises may submit loan applications to the lending institutions according to their business needs. While processing times vary depending on the specific circumstances of each case, data in recent years show that after the HKMCI received complete application documents from the lending institutions, more than 80% of applications were approved within 10 working days, and over 60% could even be approved within 3 working days, thus effectively helping SMEs cope with cash-flow pressures.
The Special 100% Loan Guarantee for SMEs and the 100% Personal Loan Guarantee Scheme (PLGS) for individuals who have lost their main recurring incomes from employment in Hong Kong during the epidemic were both time-limited special support measures. Their application periods ended on 31 March 2024 and 30 April 2023 respectively, and the two measures provided timely and effective support to SMEs and individuals who had lost their jobs and income, benefiting approximately 40,000 enterprises (involving more than 400,000 employees) and over 59,000 applicants respectively.
Regarding the SFGS, beneficiary SMEs span a wide range of industrial and business segments, including retail, catering, services, and even innovative technology. Whether family-run small businesses, long-established brands, start-ups, or relatively large-scale enterprises, they are able to weather the challenges of an economic downturn through the support of guaranteed loans.
Although the application periods for the Special 100% Loan Guarantee and the PLGS have ended, substantial debt repayment and recovery work remains as a substantial portion of loans remains within a total repayment period of up to 10 years. The HKMCI has been working closely with lending institutions to manage default cases appropriately. Specifically, lending institutions would first follow up with the borrowing enterprises/borrowers to understand their overall financial and funding conditions, and discuss feasible repayment plans with those borrowing enterprises/borrowers who are willing and able to repay so that they can continue to operate/maintain a normal life as soon as possible under the debt restructuring arrangement and gradually resume normal repayments.
At the same time, lending institutions would assess the asset positions of both the borrowing enterprises/borrowers and the relevant guarantors. Where repayment agreements cannot be reached, the borrowing enterprises/borrowers refuse to cooperate, or there are reasonable grounds to believe the borrowing enterprises/borrowers are deliberately evading repayment obligations, such as making asset transfers, lending institutions will, in accordance with their policies and usual commercial practices, consider taking appropriate recovery or legal actions against the borrowers and guarantors, with the objective of recovering debts in the most effective way to minimise losses to the Government.
According to the recovery progress reports from lending institutions, as at the end of October 2025, for the Special 100% Loan Guarantee, more than 30% of defaulting borrowing enterprises and their guarantors are facing or have undergone winding-up and bankruptcy proceedings, while nearly 20% are being pursued through court order applications. The remaining, approximately half of the cases, are primarily handled by appointed agents or in-house collection units of lending institutions. Repayment plans have been agreed in some cases, while some others are under discussion. For the PLGS, nearly 20% of defaulting borrowers are facing or have undergone bankruptcy, with the rest being handled similarly by appointed agents, in-house debt collectors, or court orders, while repayment plans have been reached or are under discussion for some cases.
While the two 100% guaranteed loan schemes have assisted many SMEs and individuals who lost their jobs and income in weathering the difficult times, there are cases where the continued challenging economic environment has led to defaults. Unlike usual commercial loans, these two products were special relief measures launched under exceptional circumstances, with the aim of providing timely support to enterprises and citizens affected by the epidemic. As such, speedy processing and approval of applications were designed as a key feature of the schemes. Taking into account the fact that targeted borrowing enterprises or borrowers could hardly meet the credit assessment criteria, such as those of business or employment prospects, under normal circumstances, the repayment ability of the borrowing enterprises/borrowers was not a primary consideration in the approval process. Of course, the product design has taken into account the prevention of abuse. Control and safeguard mechanisms were put in place, including customer due diligence and borrowers’ eligibility verification by lending institutions, as well as reporting of the borrowers’ repayment, delinquency and default records to credit reference agencies. The HKMCI also conducts appropriate checks on applications submitted by lending institutions. When launching the two products, the Government assumed an overall default rate for both at 25%. As at the end of November 2025, the cumulative default rates for the Special 100% Loan Guarantee and the PLGS were 18.5%2 and 21.2%2 respectively. The epidemic lasted for several years and brought changes in lifestyle habits and economic conditions of some citizens. Additionally, the operating environment for some SMEs has not improved as expected. All these may add pressure to default rates. Currently, the Special 100% Loan Guarantee and the PLGS have recovered approximately 37% and 41% of their loans respectively, while the majority of the remainder are in scheduled repayment.
Another area worthy of attention is the suspected illegal activities in obtaining loans under these two products, including the use of shell companies, false documents, and bribing bank staff to obtain loans. The HKMCI and lending institutions have zero tolerance for any illegal activities and will report suspected activities to law enforcement agencies instantly upon discovery. As at the end of October 2025, during the application vetting process for the Special 100% Loan Guarantee and the PLGS, the HKMCI and lending institutions rejected or withheld a total of approximately 3,100 applications, involving about HK$5.31 billion, which were suspected to be associated with illegal activities, effectively avoiding potential risks and default losses. We will continue to maintain close dialogue with lending institutions and law enforcement agencies to analyse the characteristics and patterns of suspicious cases, and require lending institutions to strengthen due diligence on loan applications, aiming to minimise losses to the Government and ensure proper use of public funds.
The Special 100% Loan Guarantee and the PLGS successfully provided timely assistance to tens of thousands of borrowing enterprises/individuals who have lost their jobs and income during the economic downturn. The HKMCI and lending institutions will continue to act prudently to provide assistance to borrowing enterprises with genuine difficulties or individuals who have lost their jobs and income, striving to ensure proper utilisation of public resources.
Colin Pou
Executive Director and Chief Executive Officer
The Hong Kong Mortgage Corporation Limited
23 December 2025
1 HKMC Insurance Limited is wholly owned by The Hong Kong Mortgage Corporation Limited
2 The cumulative default rate reflects the cumulative amount of defaulted loans as a proportion of the total amount of loans approved since the product launch. Generally, the longer a product has been on the market, the higher the cumulative amount of defaulted loans will be. Since the application periods for the Special 100% Loan Guarantee and the PLGS have ended, the total amount of approved loans will remain constant. As a result, the cumulative default rate will generally only increase over time.
