SMEs will get funding boost

SMEs will get funding boost

Policy loans to help firms denied credit

New measures to help revive business for small and medium-sized enterprises (SMEs) are being offered through a collaboration between state agencies and the private sector.

"Financial resources are a major problem," said Sakchai Unchittikul, deputy secretary-general of the Federation of Thai Industries (FTI).

"Therefore, the FTI, Thai Credit Guarantee Corporation and Office of Small and Medium Enterprises Promotion (Osmep) have collaborated in tackling difficulties. Accessing capital will be easier through a policy loan package."

Mr Sakchai said SMEs face problems of access to finance and regulations that hinder their development.

The policy loan programme will use funds mobilised by state-owned banks from government agencies' deposits.

"State-owned banks don't need to compete with commercial banks by offering attractive deposit packages," said Mr Sakchai.

"The saving in marketing costs will be used for supporting SMEs by providing loans at a rate lower than those for traditional loans." 

Salinee Wangtal, chairman of SME Bank, said many SMEs were unable to borrow from commercial banks since they could not pass stringent credit risk assessments.

Policy loans will offer an interest rate of 6-7%, which is lower than the market's minimum retail rate but 1% higher than the soft loans previously provided to SMEs.

"We want to give them a 1% spread to make sure at least their costs can be covered," said Mrs Salinee.

SMEs will be screened by Osmep.

"The SME programme will help the banks reduce non-performing loans because SMEs have been pre-selected. Most that are capable are already using commercial banks and paying higher interest," said Mrs Salinee.

The programme is likely to use a budget of no more than 2 billion baht and, if successful, it will be expanded.

Wimonkan Kosumas, acting director-general of Osmep, said regulations governing venture capital would be revised for SMEs whose innovative ideas were difficult to assess in terms of money.

"SMEs have limited knowledge of venture capital. Most are family-run business and are reluctant to get involved with a third party. However, talks about the revision of venture capital regulations are still in the early stage," she said.

On Nov 12, SME Bank will come up with new venture capital and plans to co-invest around 5 million baht in each company, but further details have not been revealed.

"We need to reassure businesses that we are a passive investor with no interest in a takeover," said Mrs Salinee.

Vallobh Tejapaibul, president of Thai Credit Guarantee Corporation, said his agency had expanded criteria for loan collateral that was currently limited to land, buildings and machinery.

The expanded list will include rental agreements, products, company good will and the value of innovation.

It is also developing guidelines to assess innovation as Thailand has no such guidelines.

Mr Sakchai said the classification of SMEs should also include the agriculture sector. Only businesses in production, commerce and services have been regarded as SMEs.

"The FTI is also working towards increasing the number of SMEs to be registered in the formal system, as we are compromising by not auditing their businesses prior to entering the club," he said.

Although Thailand has 2.76 million SMEs, many are not in the system.

The group said its recommendations could be implemented by the end of the year. It is also developing a long-term policy that will be revealed later.

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