The Control Yuan yesterday issued a document blaming the Ministry of Finance over what it called lax administration on credit guarantee funds offered to small and medium-sized businesses resulting in NT$22.78 billion worth of bad debts over the past seven years.
The Small and Medium Business Credit Guarantee Fund (
Smaller companies often find it difficult to secure loans because of insufficient collateral.
There are more than a million small and medium-sized companies in the nation.
"Due to the careless supervision of the ministry in terms of debt recoveries and risk management, the non-performing loans in the fund have been widening from 1996 to the end of 2002," the letter said.
According to the document, the fund's bad loans continued to climb from NT$1.52 billion in 1996 to NT$5.7 billion in 2001. The non-performing loan ratio increasing from 13.5 percent in 1995 to 17 percent last year.
Yesterday's move by the Control Yuan, however, was widely viewed as unnecessary.
"Risks exist in all kinds of loans business and the same situation also applies to the fund," said Day Sheng-tung (戴勝通), chairman of the National Association of Small & Medium Enterprises (中小企業協會).
"Instead of counting every penny the government lost, the Control Yuan should first check the production value and job opportunities the loans have created," Day said.
In addition, Day said the number of problem loans has been on the decline this year, as the NPL ratio was cut by 33 percent from the first half of the year compared to the same period last year.
One economics expert said the ministry should not be blamed because a higher percentage of bad debts is expected.
"The risk involved in giving credit to companies that banks refused to touch is higher, but this is a risk they must take to help companies grow," said Chou Tien-chen (周添城), an economics professor at National Taiwan University.
An official from the Ministry of Economic Affairs, which took over the management of the fund this April, said he is confident that the number of bad loans will not increase.
"The fund is unlikely to be debt free, but we will try our best in the examination of the qualifications of loan applicants and the implementation of loan recovery," said Chang Ho-jan (
"Besides, the economy is getting better compared to a few years ago," Chnag said.
Last October, the government decided to enlarge the fund to NT$20 billion over the course of two years. President Chen Shui-bian (