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Role of Thai banks in GMS investment urged

May 31. 2016
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SUBSTANTIAL demand for financing in the Greater Mekong Subregion (GMS) is providing great opportunities for Thai banks to be regional lenders to support cross-border investment, says the International Finance Corporation (IFC), a member of the World Bank.
The Thai banking sector has matured thanks to its ability to withstand difficult crises in past years, and the banks now have a clear role in supporting cross-border business activities, said Vivek Pathak, IFC regional director for East Asia and the Pacific.
The IFC and two Thai banks – Bangkok Bank and Kiatnakin Bank – on Monday signed an agreement on a syndicated loan totalling US$160 million (Bt5.7 billion) to ACLEDA Bank, a commercial bank that plays a significant role in microfinance in Cambodia. The IFC’s share of the syndicated loan is $70 million, with the rest shared by BBL, KKP and Cathay United Bank (Cambodia).
ACLEDA will use the funds to finance the Women Entrepreneurs Opportunity Facility, a first-of-its-kind global facility dedicated to expanding access to capital for up to 100,000 female entrepreneurs.
More than 40 per cent of Cambodia’s small and medium-sized enterprises are owned or managed by women, yet the vast majority of them are either unserved or underserved by the financial sector.
Pathak said the GMS market was growing strongly and there could be a lot of demand for financing, which means a lot of demand for the Thai banking sector, which is very mature. Moreover, Thai banks are well placed to provide technical skills to financial institutions in the GMS.
He said the IFC wanted ACLEDA to diversify its sources of funding, and Thai banks were the logical choice.
He said the IFC’s role was to get its clients to meet new partners as sources of funding and encouraging Thai financial institutions to invest in firms in Cambodia. He said the IFC would work with Thai banks to get them outside the home market and help them invest in Cambodia, Laos, Myanmar and Vietnam.
Pathak pointed to Myanmar as one of highest-growth markets among developing countries, and said his organisation had just signed a deal in that country’s import sector and was looking for more involvement it its power sector.
“Myanmar is a very important market for us. Following the isolation of its economy for many years, we think the IFC role will help the country moving forward,” he said.
The IFC will sign a similar deal in Myanmar to the one with the Cambodian microfinance bank in the next two or three months, he said.
In Myanmar, demands for financing are in infrastructure, financial services, and agricultural-related business.
Even though the syndicated loan in Cambodia has seen the private sector play a role in helping a small business access lending, Pathak believes that the private and public sectors have to work together to ensure that businesses including SMEs can access finance.
He does not think political uncertainty in this region will pose a concern for the IFC’s efforts to provide financial support to the developing countries, as the corporation is a long-term investor. But the key thing is that governments continue to carry out the right kind of reform, as good governance and transparency are important for the IFC.
Last year, the IFC’s long-term investment in developing countries was around $18 billion, and Pathak said this year’s figure would be the same because of uncertainties in Latin America and because commodity prices were coming down, causing the economies of developing countries to slow down. However, there are a lot of opportunities for Asean, which means the long-term investment by IFC this year should stay at $18 billion.
Commercial banks are willing to do long-term lending and a lot of them are actually pouring money into emerging markets, so the IFC’s role is becoming more importance in many markets, he added.
As for Thailand, even though it is facing an economic slowdown, the government is doing a lot of work to try to get the economy to move faster, and in his view, these efforts are in the right direction.

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