Micro-SMEs struggle for funds

Micro-SMEs struggle for funds

New government definition of small business may offer firms with five employees or less a lifeline to loans.

Fabrics made by villagers are featured at the Mae Rang Otop Village in Lamphun's Pa Sang district. CHATRUDEE THEPARAT
Fabrics made by villagers are featured at the Mae Rang Otop Village in Lamphun's Pa Sang district. CHATRUDEE THEPARAT

Amporn Khamsuwat, 60, like so many people in Thailand, has aspirations to grow her small business. For over a decade, she's been hand-crafting quality clothing to supply shops at the bustling cotton market in Don Luang village in Lamphun province, and wanted to hire a new generation of weavers to breathe fresh air into her business.

But when she asked the Small and Medium Enterprise (SME) Development Bank for a 50,000-baht loan to start her business, her request was denied.

"I think the bank may not be confident in my ability to repay the debt because I also borrowed 200,000 baht from the Bank for Agriculture and Agricultural Cooperatives [BAAC] to build my house in 2015," Mrs Amporn says. She began repayment of the debt at 9,500 baht a year two years ago.

She planned to use the money from the SME Bank to improve the quality of products and hire a new generation of weavers to help make better designs and start selling the clothing online. Her business is very small, only employing four or five housewives who work part-time.

Mrs Amporn says the bank should consider that each of her new hires could generate 5,000 to 6,000 baht a month, and they would have their own houses and a fruit garden.

She started her business in 2006 in her home at age 49 after resigning from her job as a teacher to take care of her ill husband, a former employee of a state-owned enterprise.

However, very small, "micro" SMEs like Mrs Amporn's may soon get more access to loans and assistance, as the government has called on SME Bank to change its requirements for giving out loans to SMEs and community businesses in an effort to stimulate local economies.

Sumitr Kanjana, director of the social welfare division of Mae Rang municipality, says SME Bank often asks his agency to help provide new customers, but then denies their loan requests.

"SMEs here are often very small, with 5 to 10 employees each, and may not fit the bank's requirements for a loan guarantee," says Mr Sumitr.

The government's new request may require SME Bank to change its rules for very small enterprises and community businesses.

He says if the government wants to strengthen local economies, it needs to provide not only financial support but also improve the quality of the businesses and promote e-commerce.

A local official believes Mae Rang has tourism potential. CHATRUDEE THEPARAT

There are 90 shops in Don Luang, up from 5-6 shops in 2005, each generating 20,000 to 100,000 baht a month.

Don Luang village is located on Moo 7, Baan Don Luang, Mae Rang sub-district, in Pa Sang district, Lamphun.

Mr Sumitr says Don Luang village has the potential to attract tourists as it has become an Otop tourism destination with its unique Tai ethnic culture, history, and distinction as the largest hand-woven cotton market in Thailand.

The history of the village dates back 200 years. The villagers are members of the Thai Yong Tribe, or Tai Lue that emigrated from Chiang Rung, in the Sipsong Panna area.

Cotton weaving for household use has long been part of their culture, but they began weaving for commercial sales after outsiders came to the village and wanted to buy the quality cottons.

Today visitors can purchase the clothing as souvenirs or for fashion. There is a variety of items available such as clothing, accessories, bags, pillowcases, and bed sheets.

"The prices here are about half the price of the average market," says Mr Sumitr.

After purchasing items, visitors who want to stay until nighttime to experience the way of life of the Thai Yong can sleep at a homestay.

Suwanchai Lohawatanakul, director-general of the Office of Small and Medium Enterprises Promotion (Osmep), said the SME Promotion Committee, chaired by Prime Minister Prayut Chan-o-cha, revised the definition of SMEs last month to pave the way for the government to implement more measures supporting micro-SMEs.

The office plans to implement a project to help micro-SMEs, while related agencies are expected to implement similar assistance measures for the segment.

The new definition of micro-SMEs includes manufacturing, services, wholesale and retail enterprises employing no more than five workers and earning no more than 1.8 million baht in revenue.

Manufacturing SMEs cannot exceed 50 workers and 100 million baht in revenue. Medium-sized enterprises in the manufacturing sector cannot exceed 200 employees and 500 million baht in revenue.

Medium-sized enterprises in the service sector must have no more than 100 workers and 300 million baht in revenue, while the limits for the trading sector is 50 workers and 300 million baht revenue.

Previously the definition of SMEs was enterprises with 50-200 employees and 50-200 million baht in assets, excluding land.

Osmep was allocated a budget of 1.23 billion baht for fiscal 2019.

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