TCG sets B30bn loan guarantee for frail SMEs

State-owned Thai Credit Guarantee Corporation (TCG) has set a loan guarantee amount of 30 billion baht for small and medium-sized enterprise (SME) operators whose loans are at risk of turning sour.

The credit guarantee should improve liquidity for these SMEs and keep their employees on payroll, said Finance Minister Uttama Savanayana. Some 80% of the country's workforce is employed by SMEs.

SMEs registered with the Office of Small and Medium Enterprises Promotion (Osmep) have 16 million employees in total, Mr Uttama said yesterday after a meeting with representatives from commercial banks and specialised financial institutions.

The 30 billion baht in loan guarantees for SMEs, one of three issues agreed at the meeting, is expected to help 40,000 SMEs avoid becoming defaulters, he said.

If that amount is insufficient, increases can be made in the future, Mr Uttama said.

The meeting agreed to delegate Osmep to lead on lending to SMEs that cannot access traditional loans because they lack collateral or fail to meet accounting standards.

Osmep will lend up to 1 million baht per borrower.

The loans to small SMEs are set at 50 billion baht. Osmep will seek approval from the National Economic and Social Development Council next week on behalf of a screening committee for the 1 trillion baht in borrowing before forwarding the motion to the cabinet for final approval.

The meeting also agreed with the Fiscal Policy Office and the Government Savings Bank on consideration of additional measures to assist tourism-related business operators.

Predee Daochai, chairman of the Thai Bankers' Association and co-president of Kasikornbank, said debt-servicing ability in the past was the determinant of whether to lend to SME operators at risk of default.

TCG president Rak Vorrakitpokatorn said the 30-billion-baht credit guarantee will enable banks to lend 45 billion baht to 30,000-40,000 SMEs.

Commercial banks are deeply familiar with the SMEs in their portfolios and can judge their ability to survive, Mr Rak said.

Lenders will decide which SMEs are eligible for fresh loans based on borrowers' debt-repayment ability, he said.