An increase in non-performing loans (NPLs) during the first seven months of this year primarily stems from wholesale and retail businesses, according to the Small and Medium Enterprise Development Bank of Thailand (SME D Bank).
Phichit Mitrawong, the bank's managing director, said sluggish economic conditions have led to a contraction in consumer purchasing power, affecting the sales of domestic wholesale and retail businesses.
As of July, the bank's NPLs stood at 13% of its total loan portfolio of 100 billion baht, which means that the bank currently has NPLs amounting to around 13 billion baht.
This is an increase from the end of last year when the NPL rate stood at 8%. The bank's loans to wholesale and retail businesses account for around 40% of its loan portfolio, according to Mr Phichit.
During the first seven months of this year, the bank approved and extended loans worth about 30 billion baht in total.
The bank aims to extend a total of 70 billion baht in loans this year, said Mr Phichit.
He noted that SME D Bank is a state-owned financial institution with a mission to fill gaps in the financial system. This means that SME D Bank assists certain SMEs that may not be able to receive loans from commercial banks.
The bank is responsible for creating opportunities for SMEs to access loans while also managing risk at an appropriate level.
Currently, broadly defined, Thailand has about 3.2 million SMEs and micro SMEs.
Mr Phichit noted that if only businesses registered with the Commerce Ministry, which number around 400,000, were taken into account, about 90% of these were classified as SMEs, while the remainder are larger businesses.
The Fiscal Policy Office under the Finance Ministry projected in April that the Thai economy would grow by 2.4% this year. Although this is an improvement from 1.9% growth in 2023, the Finance Ministry still considers it below Thailand's potential growth rate of 3.5%.
The Finance Ministry recently implemented several measures to assist SMEs. These include the issuance of 100 billion baht in soft loans by Government Savings Bank, which would be relent to commercial banks at an interest rate of 0.01%, and these commercial banks, in turn, would lend to SMEs at a rate not exceeding 3.5%.
Additionally, the Thai Credit Guarantee Corporation has launched the PGS 11 loan guarantee programme with a guaranteed amount of 50 billion baht. The programme will guarantee up to 30% of the loan portfolio participating in the programme and will charge an average guarantee fee of no more than 1.75% for the entire programme.
Furthermore, the Finance Ministry has approved an extension for the reduced contribution rate to the Specialized Financial Institutions Development Fund.
Normally, state financial institutions must contribute 0.25% of their total annual deposits to the fund. However, for 2024, this rate has been reduced to 0.125%. This marks the fifth consecutive year of reduced contribution rates following the pandemic.
