Development bank poised to drive businesses once again

Development bank poised to drive businesses once again

SME Bank chairwoman Salinee Wangtal and president Supot Arevart flank actress Noi Phongam for a
SME Bank chairwoman Salinee Wangtal and president Supot Arevart flank actress Noi Phongam for a "food vendor" promotion, part of a programme to rehabilitate and revive the ailing bank. (Photo courtesy SME Bank)

Almost from ashes, the once-ailing Small and Medium Enterprise Development Bank of Thailand (SME Bank) has eventually made an impressive turnaround and looks set to resume its role as a financial institution to drive small- and medium-sized businesses into prosperity.

All credit for the SME Bank's success should go to the management under Salinee Wangtal which has been able to salvage the state-controlled bank.

One of the seven ailing institutes that need to be cured, the SME Bank is the only one that making solid progress and is on the path to recovery despite unfavourable economic conditions in the past years. 

Last year was the first time the bank was able to slash its non-performing loans (NPLs) to well below 30% of its outstanding loans in recent years. During the bad times, NPLs, an indicator of a bank's state of well-being, soared to almost half of the bank's loans before being gradually brought down. In 2014, NPLs were recorded at 39.92% or 35 billion baht of loans.

The bad loans had crippled the performance of the bank which is supposed to heighten competitiveness for the country's economic system given the fact that small- and medium-sized enterprises account for 90% of the businesses registered with the Commerce Ministry or around 2.9 million establishments in total.

The bank's recovery is attributed to management's adherence to good governance principles with the instalment of a loan monitoring mechanism that ensures loan allocations are efficiently regulated in all of its branches. In addition, it has abided by an instruction of the Finance Ministry to place the loan ceiling at a 15-million-baht maximum for each borrower.

In its clean-up effort, the management of the SME Bank has purged more than 50 officials involved in a number of fraudulent acts.

Salinee: SME Bank's driving force

It should be noted that most state-controlled financial institutes including the SME Bank had experienced common problems: a lack of good governance and the intervention of politicians for their own personal gain. This hit their operation hard and affected small business operators. This problem has robbed the country of an opportunity to boost its competitiveness.

In fact, some may argue that its current NPLs, at 29.75% of the bank's outstanding loans, are still high compared to those of commercial banks which are at a 3% average. But that may not necessarily be the case as, given that the objective of the bank is to be a development institute to support small- and medium-sized enterprises, a role that makes it different from commercial banks whose main goal is to maximise profit, the SME Bank is allowed to accommodate higher NPLs. For this reason, the loans that the SME Bank gives out can carry some risks compared to those of commercial banks.

More importantly, it's well understood that SMEs are different from large or multinational companies in the sense that the former is considered to be the economy's "middle chain"  -- that can play a big role in enabling the country to achieve the enhancement of its competitiveness, people's well-being and, at the same time, free the country from the middle-income trap. In short, small- and medium-sized businesses are key to a healthy economy, for prosperity with fair distribution.

For the past 11 months, it's been a business-as-usual scenario for the SME Bank as it has allocated about 30 billion baht of new loans to some 12,700 small- and medium-sized business operators. It is hoped that the loans can nurture SMEs operators to enable them to grow and become strong enterprises.


Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.

Wichit Chantanusornsiri

Senior economics reporter

Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.

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