Joint package to help SME contractors win state projects
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KTB looks to loan growth, joins TCG in offer of loan/credit guarantee service
Krungthai Bank aims to drive its loan portfolio of small and medium-sized contractors that specialise in public-sector jobs to Bt66 billion in the next two years, from Bt56 billion now, through a lending and credit-guarantee package co-developed with the Thai Credit Guarantee Corp (TCG).
Prasit Wasupath, senior executive vice president of KTB, said yesterday that the bank would strongly focus on SMEs that win contracts with state agencies, especially under the planned Bt2-trillion infrastructure mega-project.
SMEs can compete with large contractors if they have sufficient funds and credit guarantees in the first stage of bidding, he said.
“The mega-projects under the Bt2-trillion plan will offer great opportunities for small and medium contractors and procurement providers, if at the beginning of the bidding process [they have a] letter of guarantee for buying a bid bond,” he said.
KTB has developed a procedure to provide a letter of guarantee within one day to accommodate SMEs requiring a bid bond. For those that win a contract, the bank will provide pre-financing of up to 30 per cent of project value.
At this point, TCG will offer a credit guarantee of 70 per cent of the pre-financing to KTB customers, said TCG executive vice president Wichet Warakul.
He said TCG would guarantee credit of up to Bt40 million per customer with a maximum term of seven years. Under this programme, which will end in 2015, TCG hopes to guarantee credit of Bt240 billion for KTB customers.
The credit-guarantee fee is 1.75 per cent per annum of the loan amount.
Wichet explained that the credit guarantee for pre-financing would ensure that small enterprises had enough cash flow to run the project and bid for additional government projects.
Year to date, TCG has guaranteed Bt6.5 billion worth of credit to SME contractors, 54 per cent of which are customers of KTB.
KTB will also offer post-financing to SME contractors in terms of overdrafts (O/D), promissory notes (P/N) and factoring of up to 90 per cent of project value.
Rates
The O/D interest rate will be MOR (minimum overdraft rate) plus 1.5 percentage points, and for P/N MOR+1 percentage point. The interest rate for factoring is 7.375 per cent.
Prasit believes that offering total financial solutions throughout the bidding process, up to and including post-financing, with the cooperation of TCG will attract SME contractors into the financial system while minimising the likelihood of jobs being abandoned by contractors.
He said KTB’s SME portfolio currently was Bt350 billion. The bank aims to draw interest and fee income from the programme of more than Bt560 million.
