BoT considers guarantees for SMEs

BoT considers guarantees for SMEs

People discuss financial deals at the SME D Bank booth at a Money Expo. Ms Suwannee says banks have become more prudent when granting SME loans because of higher credit risk in this segment amid economic uncertainties.
People discuss financial deals at the SME D Bank booth at a Money Expo. Ms Suwannee says banks have become more prudent when granting SME loans because of higher credit risk in this segment amid economic uncertainties.

The Bank of Thailand is studying the possibility of launching credit guarantee schemes for small and medium-sized enterprises (SMEs), aiming to broaden their access to bank loans.

Assistant governor for the supervision group Suwannee Jatsadasak said the central bank is studying various credit guarantee schemes used in other countries, including Japan and Taiwan, which offer larger credit guarantee packages to SMEs than Thailand.

Packages in these two countries are based on sharing of benefits and risks between businesses and financial institutions, so they require less government budget to support them, she said.

According to data provided by the Bank of Thailand, bank loans in 2023 contracted 0.3% from a year earlier. SMEs with a credit line of less than 500 million baht each recorded a 5.1% year-on-year contraction in loans in the third quarter of 2023, following a 5.5% decline the previous quarter.

The ticket size of SME loans also declined recently from around 10 million baht per company. Given weaker financial capacity in this business segment amid an uneven economic recovery, SMEs now have less access to bank loans, said Ms Suwannee.

"Banks have become more prudent when granting loans to SMEs because of higher credit risk in this segment amid economic uncertainties," she said.

Credit guarantee schemes suit the requirements of SMEs, while allowing financial institutions to better evaluate risks associated with SME loans, said Ms Suwannee.

Central bank data indicated in the fourth quarter of 2023, SMEs' non-performing loans (NPLs) rose to 6.66% from 6.64% in the previous quarter. SME special mention loans, defined as loans overdue from 30 to 90 days, increased to 11% from 10.6% over the same period.

Demand for unsecured loans, which cover credit card and personal loans, among SMEs also increased.

"This may be one reason why the National Economic and Social Development Council [NESDC] proposed the central bank waive the minimum payment for credit card debts," she said.

Since the beginning of this year, the central bank increased the minimum payment of credit card loans to 8% of the total balance after the ratio was halved to 5% during the pandemic from the regular level of 10%.

The central bank is planning to return the required minimum payment to 10% next year.

Ms Suwannee said the central bank plans to discuss minimum credit card payments with the NESDC as increases would affect some cardholders, both individuals and SMEs.

"However, keeping the ratio at a low level would impact borrowers in the longer term because they need to shoulder a higher financial burden," she said.

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