The Federation of Thai Industries (FTI) asked Prime Minister Prayut Chan-ocha on Friday to increase SMEs’ access to liquidity. The government has accepted the proposals and will now be going over details in the coming weeks.
Supant Mongkolsuthree, FTI’s chairman, told Thai Enquirer on Thursday that even though the Bank of Thailand (BOT) introduced a soft loan budget worth 500 billion baht in April, commercial banks are still reluctant to provide liquidity to SMEs in fear of non-performing loans (NPLs).
Less than 17 per cent of the budget has been allocated outward since it was introduced on April 7.
“The money is there but the banks are not giving it out to SMEs because they are worried about NPLs,” he said.
Supant told Thai Enquirer on Friday that after his meeting with the PM, the premier accepted all of the proposals to help SMEs; however, some will have to be evaluated by government agencies before they can be introduced to the cabinet.
The FTI also proposed to increase the Thai Credit Guarantee Corporation (TCG)’s budget by 200 billion baht in order to provide more loan guarantees for SMEs. Supant said the Ministry of Finance has accepted the proposal but the budget will not be to the scale of FTI’s expectation.
“They said they might not have that much budget left for such measure so we will have to wait and see how much the budget will be,” he said.
According to the BOT’s measures, the central bank will provide soft loans of 500 billion baht at 0.01 per cent interest rate per annum to financial institutions for two years.
The institutions will then on-lend to SMEs at a concessional rate of 2 per cent per annum with a cap of 500 million baht per SME. The government will absorb interest cost for six months for SMEs that took out the loan.
It was estimated that about 1.7 million SMEs with a cumulative outstanding loan of 2.4 trillion baht are eligible for the 500 billion baht soft loan scheme.
So far, only 82.7 billion baht worth of loans has been approved to 51,991 individual SME debtors as of June 19.
Supant said part of the problem was that the SMEs were not meeting BOT’s conditions.
Some of them made more than 500 million baht revenue in 2019 but they still need help from the sudden shortage of liquidity. Many of them also have bad credit but they need credit to stay afloat.
One of BOT’s condition is that the SME must still have performing loans with normal repayment status or arrears of less than 90 days (non-NPL) as of December 31, 2019. The maximum drawdown for the soft loan is 20 per cent of the outstanding loan as of December 2019.
FTI’s first proposal is for the TCG to provide loan guarantees for SMEs that are taking out loans from BOT’s scheme.
This includes providing TCG with an extra budget of 200 billion baht so that the agency can provide more loan guarantees for SMEs.
The second proposal is to accelerate the Ministry of Finance’s measure to introduce another soft loan policy with a budget of 10 billion baht for SMEs that do not meet BOT’s conditions for its soft loan policy.
On May 26, the cabinet already approved the measure.
“More loan guarantees from TCG for SMEs would make banks more inclined to give out loans to SMEs that are in deep trouble right now,” Supant said.
“Normally, it will take SMEs around 3-5 years to recover. If the government increases TCG’s budget by 200 billion baht, they will be able to expand its coverage period to five years and that will provide more confidence for banks to give out the loans,” he added.
