Kraft Foods Inc.

An innovative MicroCredit Business Scheme (MCBS) has been launched in Singapore to help people from low-income backgrounds create a sustainable income by establishing or expanding their small businesses. The project is a pioneering initiative in Singapore that is being implement as a collaboration between POSBank (POSB), Tote Board, and the Social Enterprise Hub.

Mr. Kuo How Nam, the program office head of the MCBS, says that since the last three years, the idea of creating a "bank" for the poor within an urban context had been doing round in the government circles in Singapore. The idea gathered more steam in 2010 when the effects of a global economic slowdown impacted Singaporeans.

Mr. Kuo, who is also the president of Credit Counseling Singapore, recalls, "At that point, there was unemployment ... and a lot of remarks that middle-aged people couldn't find jobs. There was a feeling: would a microcredit scheme be useful in providing low- to no-income families the means to start their own business? But the key question was - would there be sufficient volume for the scheme to be viable, and if so, what form should it take? So, there was quite a bit of uncertainty."

Mr. Kuo, along with the chief executive of Tote Board, Tan Soo Nan, developed a pilot project, for which the Tote Board provided the seed capital of S$5 million. The group established collaboration with POSB for microloan administration, structuring, disbursement and repayment. The MCBS program office manages the project, including evaluating loan applications and providing support services to borrowers.

The project has also roped in a number of voluntary welfare organizations to help spread awareness about the project. Under the terms of the project, Singaporean citizens with an annual income of less than S$30,000, who were hitherto unable to raise loans through traditional financing channels, can now receive unsecured loans ranging between S$5,000 and S$ 50,000 for their small businesses.

The project has drawn enthusiastic response from applicants, who are required to submit a business plan that gets reviewed by the MCBS. Mr. Kuo says about the project, "This scheme is not a grant, it is not an entitlement. We are not a private equity fund. We are not an angel fund, neither are we a venture capitalist. This is a commercial loan and it is expected to be repaid."