The state-owned Small and Medium Enterprise Development Bank of Thailand (SME Bank) has proposed a one-year grace period for SMEs to fully comply with new lending practices that require them to have a single financial account.

Commercial banks will tighten their loan approval to SMEs after the adoption of the new practices starting on Jan 1, 2019, said president Mongkol Leelatham.

The International Financial Reporting Standards (IFRS), which will be applied from 2020, will make it more difficult for smaller SMEs to access loans from financial institutions, Mr Mongkol said.

About 500,000 of the 5.2 million SMEs and micro SMEs across the country are ready to sign up as juristic entities, while 80% of all SMEs are smaller and do not comply with accounting standards, he said.

In his view, SMEs should be given one year to comply with the full requirements and their financial account should initially be required to show sources of income and financial liquidity.

Under the single account scheme, the Bank of Thailand will require banks to give greater consideration to financial statements submitted to the Revenue Department when considering SME loans, starting next year.

The requirement, however, has stoked concerns that the single account scheme will lessen access to finance for most SMEs, which tend to use more than one financial account and submit the smallest one to understate or avoid tax.

The Bank of Thailand will reportedly stick to its Jan 1, 2019 deadline of requiring banks to use financial accounts submitted by SMEs to the Revenue Department for loan approval, but the central bank may offer a three-year grace period for full compliance.

Mr Mongkol said that if a relief period is allowed, SME Bank stands ready to provide financing to small-business operators during the transition period through the SME development fund under the Pracha Rat (People's State) initiative.

The bank will request additional funds from the cabinet if the amount is insufficient, he said. Some 2 billion baht remains available from the fund.

Thanawat Phonvichai, vice-president for research at the University of Thai Chamber of Commerce (UTCC), said policymakers may require SMEs who need the one-year relief period to sign up.

According to a UTCC survey of 1,200 SMEs, 57.5% have regularly made financial accounts, 33.1% have periodically made financial accounts and 10.4% have never done so.

Mr Thanawat said SMEs contribute 40% of the country's GDP, and half of that derives from 3 million smaller SMEs. If these smaller SMEs became unbanked, it would harm the overall economy and could slow economic growth next year, he said.