By Sucheera Pinijparakarn
Kasikornbank, the leader in lending to small and medium-sized enterprises, says the baht's appreciation is more serious for supply-chain businesses than exporters as the latter can pass their forex-related costs to suppliers.
Supply-chain businesses, many of which are SMEs, have insufficient tools against currency volatility, said KBank executive vice president Patchara Samalapa.
Supply-chain SMEs in agriculture, wooden furniture, textiles, electronic parts and auto parts are at high risk from the baht’s appreciation as they have relatively low margins and are labour-intensive.
KBank’s lending to this category was Bt9.18 billion last year, or 2 per cent of the SME portfolio worth Bt480 billion. The bank has calculated that if the baht were to average 28.50 against the US dollar and no measures were introduced to help businesses in this predicament, its non-performing-loan rate would jump to 3.37 per cent by the end of this year from 3.19 per cent at the end of March.
“We will look after this kind of customer by offering risk-management products and working capital for undertaking trade-finance activities with credit lines for forward contracts. NPLs this year are expected to be controlled at 3.05 per cent as we will help restructure debts for customers, while new loans to other segments will help [compensate for] the bad debts,” he said.
To trade-finance customers, for which KBank has a loan portfolio of Bt40 billion, of which Bt16 billion or 20 per cent is to exporters, the bank offers two products – forward contracts and foreign-currency options – to help reduce risk from the baht’s volatility. However, fewer than 5 per cent of them use these tools.
For forward contracts, clients have no need to pay a fee to the bank as they are locked into a fixed exchange rate. Under the foreign-currencies option, customers are free to unlock themselves from a certain rate if they see a more potentially profitable rate in the forex market. This option requires a fee.
The bank has attempted to design an attractive product to help SMEs reduce risk from the baht’s appreciation by allowing customers to choose when they unlock themselves from a certain rate.