Finance Minister Apisak Tantivorawong has toned down his recent comments about a large interest rate spread between corporate and small-business loans, saying the gap will be gradually narrow with the use of big data in lending and the introduction of financial statements submitted to the Revenue Department for loan applications.
Leveraging big data technology in lending makes loan extension easier and lowers credit costs, he said, citing Alibaba's financial arm Ant Financial as an example.
With online shopping history and big data technology, Alibaba affiliates can analyse the credit risk of each borrower. They then compete with traditional banks by offering a lower interest rate for consumers and small-business operators.
Mr Apisak expects non-bank companies to soon adopt the same lending platform to compete with commercial banks.
He previously said the rate gap between corporate and small and medium-sized enterprise (SME) loans was too wide and suggested commercial banks trim the rate for SMEs. Banks charge corporations 1-1.5%, far below the 7-9% for SME borrowers.
"I think competition in interest rates will gradually intensify as it has with credit cost, which requires in-depth analysis about future liability because lenders must shoulder the burden if loans turn sour," Mr Apisak said.
The Revenue Department's single financial account scheme, which requires banks to use financial statements submitted to the tax-collecting agency as key documents for loan scrutiny starting from next year, will also help bring down SMEs' borrowing costs because lenders can lower their workforce and cut down on expenses in verifying financial statements, he said.
Despite the wide interest rate gap between loans for SMEs and corporations, banks' overall interest rate spread averages 2%, which is an acceptable level, Mr Apisak said.
He said the government is trying to assist SME operators by offering them soft loans, but such aid comes at the expense of the government budget to subsidise the interest rate.
Specialised financial institutions cannot play a leading role in dictating or reducing market rates, Mr Apisak said, as their purpose is to serve customers who have high risk and largely are ignored by commercial banks. SFIs' costs are typically higher than commercial banks': their non-performing loan ratio averages 3-4%, compared with 1-2% for commercial lenders.
Mr Apisak's remarks last year on narrowing the interest rate spread prompted commercial banks to cut their prime lending rates in the range of 25-50 basis points.