The Government Savings Bank (GSB) has unveiled a 10-billion-baht new loan programme to help beef up financial liquidity for small and medium-sized enterprises (SMEs) by using land titles as collateral.
As many SMEs are still experiencing difficulty in doing business and are unable to obtain loans from financial institutions because of a lack of income and existing debt burdens, they have turned to various forms of informal loans, using land as collateral in particular, said Vitai Ratanakorn, GSB's president and chief executive.
Entrepreneurs have been exploited because of the very high interest rates that come with informal loans, creating a high probability they will lose their land, said Mr Vitai.
To provide a financial solution for distressed SMEs, GSB is offering a new loan programme for them, enabling the use of land titles as collateral for loans of up to 50 million baht.
The objectives are supplementing financial liquidity for SMEs or allowing them to retrieve land deeds given as collateral for informal loans, he said.
GSB will consider a maximum lending rate of 70% of the land appraisal value, as appraised by government bureaucrats, without accounting for existing debt burdens and the income of SMEs for loan approval.
Interest is capped at 5.99% per year throughout the loan contract period.
Borrowers can repay the principal amount to redeem lands whenever they are ready.
The situation is expected to improve over the next three years as businesses will be able to service their debts on time when business operations recover, said Mr Vitai.
The new loan programme for SMEs is open for applications until June 30, 2021, or until the full credit line of the programme is depleted.
The new loan programme is a follow-up of several measures rolled out earlier to help affected SMEs reeling from the pandemic, such as offering special loan conditions to help ease financial burdens among retail businesses and rural communities, as well as issuing soft loans for SMEs operating in the tourism and fishery segments.