State-owned Thai Credit Guarantee Corporation (TCG) is poised to seek the Finance Ministry's nod for the launch of portfolio guarantee scheme (PGS) 9 worth 200 billion baht after the current PGS's amount is projected to be used by June because of strong demand amid the Covid-19 outbreak.
For the first three months this year, TCG provided guarantees for 40 billion baht in loans, up significantly from 15 billion baht over the same period last year, said president Rak Vorrakitpokatorn.
With the strong demand, the total loan guarantee amount is expected to surpass the target of 100 billion baht this year, he said.
The coronavirus outbreak and the government's measures to contain the spread have disrupted many businesses and dampened financial institution confidence in granting new loans, particularly to those who are not on banks' prime customer list, Mr Rak said.
A loan guarantee facility is then needed for those who are not banks' prime clients to ensure that lenders will not lose even if loans turns sour, he said.
Mr Rak urged financial institutions to change their loan approval criteria, which are largely based on ability to pay and prevent virus-hit small and medium-sized enterprises (SMEs) from accessing financing.
These SMEs may be forced to resort to underground lenders who charge excessive interest.
Banks should use a willing-to-pay approach instead, Mr Rak said.
Those who have never defaulted deserve to get loans, and TCG is ready to provide them credit guarantees, he said, adding that banks should offer loans based on fixed costs for a certain period to enable SMEs to survive and continue paying or hiring staff.