Hong Kong to expand IP financing sandbox after 7 firms secure cheaper loans

The Hong Kong government has pledged to expand its intellectual property (IP) financing sandbox scheme by adding more participating banks and enterprises, after seven corporate users found that a nine-month trial helped lower their borrowing costs.

“This will help refine the IP ecosystem, including valuation practices, professional service costs, supporting measures and market awareness,” Carmen Chu Lap-kiu, executive director of banking supervision at the Hong Kong Monetary Authority (HKMA), said on Wednesday.

“These initiatives can also better support the development of the Northern Metropolis and key industries, while helping small and medium-sized enterprises go global and explore new markets.”

She said the scheme was expected to support key industries in the Northern Metropolis megadevelopment, such as hi-tech, logistics and education, with their future financing needs.

Chu’s remarks came as the Commerce and Economic Development Bureau, the Intellectual Property Department and the monetary authority – the city’s de facto central bank – announced the first batch of successful pilot cases.

The seven cases span the electronics, construction, toy manufacturing and medical device sectors, with loan amounts ranging from HK$1 million to HK$39 million.

Proposed in last year’s policy address, the initiative provides a “pioneer and pilot” approach and a collaborative, risk-controlled environment for banks, enterprises and relevant professional services organisations to test the full life cycle of financing arrangements based on IP assets, aiming to build practical experience.

Three note-issuing banks – Bank of China, HSBC and Standard Chartered Hong Kong – took part in the scheme.

Chu noted that the project had enabled businesses to secure larger loans at lower interest rates, as banks took enterprises’ IP valuations into account when assessing future business development and repayment capacity, and accepted the valuations as collateral to mitigate credit risk.

“Banks incorporate IP valuation reports into their credit assessments. Based on these valuations, banks can award additional points in the credit evaluation, enabling enterprises to obtain larger and cheaper loans,” she said.

“From the successful cases, we can see that after taking IP valuations into account, the loan amounts secured by enterprises have increased by 25 to 50 per cent, and the interest rates on the loans can also be reduced by 25 to 150 basis points.”

Chu said banks were already processing additional cases and expected the number of successful applications to keep rising.

While authorities planned to expand the trial by inviting more banks, enterprises and professional institutions to take part, Chu said they had not set a rigid timeline or specific targets for the number of participating banks and businesses.

Helen Chung Chi-ching, deputy secretary for commerce and economic development, said the scheme addressed lending challenges faced by companies with high-quality IP but lacking physical collateral, describing the trial as a solid start.

“We aim to accumulate more diverse cases across different industries so that we can observe market responses, learn from the experience and consider how to expand in the next phase,” Chung added.

“[We hope] that the participating enterprises will be more diversified. As we see, there are currently four industries involved; all comers are welcome in the future.”

The government also announced the launch of the two-year Pilot Patent Valuation Support Scheme through the Hong Kong Technology and Innovation Support Centre on Wednesday.

It provides one-off funding capped at HK$80,000 through a matching grant model to support small and medium-sized enterprises in commissioning a qualified service provider to value their patents and other IP assets.