BAY promotes value chain products
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Bank of Ayudhya has developed value-chain solutions to increase working-capital loans in its SME portfolio, drive fee income and expand current and savings accounts.
Sayam Prasitsirigul, head of SME banking at BAY, said yesterday that its portfolio for small and medium-sized enterprises was currently split 70:30 between term and working-capital loans.
The bank is promoting its value-chain products because they charge a lower interest rate than overdrafts (O/Ds), he said.
Traders generally rely on O/Ds to augment liquidity or cover unexpected expenses. For example, several SMEs asked for O/Ds to pay the increase in labour costs from the rise in the daily minimum wage to Bt300.
The value-chain solutions are designed to improve cash flow from transactional payments to SMEs and larger companies or sponsors. The operators in supply chains are the suppliers and dealers of sponsors.
Supply chains are crucial for the growth of economy, and the floods last year proved that shortages could seriously cripple the larger companies and the entire economy.
BAY hopes the value-chain solutions can attract new customers to use Krungsri as their operational bank. Then the transactions of sponsors and their suppliers will lead to more fee income, Sayam said.
New player
Suppliers who borrow value-chain loans have to open accounts with Krungsri.
The bank can expand its current and savings accounts because value-chain businesses will hold their cash with the bank.
BAY is a new player in supply-chain lending, so to approach many prospective customers in a short time, it will contact sponsors to get a list of their suppliers and dealers.
The bank has perfected a pre-approval model to analyse the qualifications of prospective value chain customers and set the credit limit and interest rate. The model helps the bank figure out the number of operators in the supply chain that match the criteria, Sayam said.
Suppliers and dealers are required to have a track record with their sponsor of at least two years.
The bank has started using the model with the supply chains of Siam City Cement and LG Electronics Thailand. It will sign an agreement with two companies soon and is in talks with four or five larger companies. The bank is aiming for Bt10 billion in loans from the value-chain solutions.
Its SME loans are expected to grow by 16 per cent to Bt180 billion this year. The investment in the country and domestic consumption have caused its SME loans slightly
to exceed its first-half target, Sayam said.
