TCG crafts bad debt guarantees
SME support line starting in April
State-owned Thai Credit Guarantee Corporation (TCG) is preparing to launch a 20-billion-baht bad debt guarantee programme to assist struggling small and medium-sized enterprises (SMEs) saddled with bad debts.
The bad debt guarantee programme will commence in April for SMEs whose loans have turned into special mention loans, defined as loans overdue by no more than 90 days or three months, said Rak Vorrakitpokatorn, TCG's president and chief executive.
The programme will also cover SME loans that have turned into non-performing loans (NPLs), defined as loans overdue by more than 90 days, although these NPLs must not exceed two years of overdue payment, said Mr Rak.
TCG will provide a maximum claim of 40% for financial institutions that are creditors of SME loans.
Of the 20-billion-baht bad debt guarantee, 10 billion will be allocated for SME loans classified in the special mention loan segment, while another 10 billion will be allotted for SME NPLs.
In 2020, TCG launched a 50-billion-baht loan guarantee programme for SMEs with debt-servicing problems, whereby the combined value of bank loans totalled 75 billion baht. A total of 98% of SMEs under the programme have managed to survive during the one-year period covered by loan guarantees.
SME NPLs were registered at around 400-500 billion baht last year. Of this amount, 300 billion baht or 60-70% of total SME NPLs were classified as "active" bad debts with overdue payments, according to TCG.
This is a loan segment where TCG can offer a bad debt guarantee programme, said Mr Rak.
For tourism-related businesses, TCG has devised a 10-billion-baht loan guarantee programme with a 35% maximum claim in a bid to entice financial institutions to provide loans to this business segment, he said.
Normally, NPLs arising from loan guarantees average 15-20%, he said.
Tourism business operators can seek credit lines for the loan guarantee programme during March 2-May 31, whereby the programme will guarantee loans worth 200,000-100 million baht.
This loan guarantee programme is expected to help around 15,000 tourism business operators reeling from the pandemic crisis, said Mr Rak.