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Bangkok Post - Credit guarantee extension urged
Credit guarantee extension urged
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Credit guarantee extension urged

Supporting SME liquidity crucial

A man covered in plastic walks past a sign in Khaosan Road. Several businesses across the country have been shattered by the pandemic. (Photo by Wichan Charoenkiatpakul)
A man covered in plastic walks past a sign in Khaosan Road. Several businesses across the country have been shattered by the pandemic. (Photo by Wichan Charoenkiatpakul)

Business leaders are urging an extension of credit guarantees provided to small and medium-sized enterprises (SMEs) under the 500-billion-baht soft loan scheme, expanding from two years to 10 years to assist them.

An extended credit guarantee period by the Thai Credit Guarantee Corporation (TCG) will help support liquidity of SMEs affected by the pandemic, said Payong Srivanich, chairman of the Thai Bankers' Association, during Wednesday's meeting of the Joint Standing Committee on Commerce, Industry, and Banking (JSCCIB).

All related parties, including the government, private sector, Finance Ministry, Bank of Thailand, National Economic and Social Development Council, TCG and financial institutions have deliberated on this issue.

There are several instruments under discussion and the outcome will depend on agreement between the government and related authorities, said Mr Payong.

"Given the economic downturn and excess production capacity, there is no more loan demand for new investment. Soft loans will be focused on supporting business liquidity," he said.

"Loan approval will also focus on improving business potential and reducing long-term operation costs in preparation for the post-Covid-19 business landscape."

The soft loan scheme is due to expire at the end of this year. The TCG's credit guarantee for SMEs can be prolonged twice for six months, or until the end of next year.

The TCG previously received soft loans from the central bank worth 57 billion baht to provide loan guarantees for struggling SMEs.

The central bank has offered 500 billion baht in soft loans at 0.01% interest to financial institutions for two years to re-lend to SMEs, with a maximum credit line of 500 million baht at 2% interest.

The government will absorb interest charges for six months for SMEs that receive soft loans.

To be eligible, SMEs must operate domestically, be non-listed companies, have a credit line of up to 500 million baht from financial institutions, and have serviced debt or made late payments within 90 days of the due date at the end of last year.

Regarding Thailand's economic outlook, the JSCCIB forecasts a recovery will gradually begin in the third and fourth quarters after bottoming out in the second quarter.

Under this scenario, the business group maintains its projection for an economic contraction of 7-9% in 2020 for Thailand's economy.

JSCCIB upgraded its export outlook from a contraction of 10-12% to 8-10% following better than expected second-quarter data.

Despite anticipating an economic recovery, the projection is marred by downside risks on the external front as the number of infections continues to increase across the globe this quarter, according to the group.

Surging infections will impact external demand globally and put pressure on economic recovery.

The Bank of Thailand's Monetary Policy Committee (MPC) said financial institutions should expedite debt restructuring for retail borrowers and businesses to a wider extent and accelerate lending under various measures to address liquidity problems in a targeted and timely manner, consistent with business restructuring, according to the edited MPC minutes.

Commercial banks have robust capital funds and loan-loss provision levels capable of absorbing the impacts of the pandemic. Commercial banks need to prepare for the uncertainty of the pandemic and the deteriorating debt servicing capability of businesses and households, said the edited minutes.

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