Joint push for govt support to SMEs

Four private and public organisations have urged the government to offer more tangible support to small and medium enterprises (SMEs) by improving their access to finance and lowering regulation barriers that have hampered the advancement of their businesses.

They have also proposing a redefinition of the term “SME” in order to facilitate gathering of comprehensive data for future study by researchers.

The Federation of Thai Industries (FTI), the Office of SMEs Promotion (OSMEP), Small and Medium Enterprise Development Bank of Thailand (SME Bank) and Thai Credit Guarantee Corporation (TGC) yesterday proposed 11 urgent measures to provide more tangible support for the development of SMEs because they believe advancement of the country’s SME sector is critical to help Thailand escape the middle-income trap.

“SMEs are the heart of the country’s economic expansion,” said Sakchai Unchittikul, deputy secretary-general of FTI and president of the Small and Medium Industrial Institute. “However, there are many obstacles that have prevented the development of the sector, especially the lack of financial access and various regulation barriers,” he added.

The first seven measures are aimed at improving SMEs’ ability to gain access to financing and these include measures that have already been introduced and the ones still in the pipeline.

The measures that have been introduced include FTI cooperation with SME Bank’s “9 Credit Menus to returns Happiness to SMEs” project with a total lending amount of Bt19 billion for SMEs, and their collaboration with Siam Commercial Bank in the “SMI Fast Track” programme to provide loans worth Bt16 billion to SME operators.

Meanwhile, among ideas that have been coined for a long time but are yet to be introduced are policy loan, innovation grant and tax exemption for innovative SMEs, nano-finance, venture capital, and the push for the Business Guarantee Act along with the amendment of TGC regulations in order to increase the number of assets (such as the value of the business), which can be used as collateral for loans from financial institutions.

In terms of policy loan, Sakchai said the policy required government initiative and support,  as it involved the gathering of all state agencies’ savings in various financial institutions to be saved under or loaned to government financial institutions in order to provide low-interest loans to SMEs. The current market interest rates are quite high and SMEs are facing a problem of high financial costs that hamper their ability to compete with larger and foreign companies.

“The policy loan was successfully implemented during the flood crisis and it can be used now to help SMEs, which deserve financial assistance to improve their business, and to support their growth from small and medium entities to bigger businesses,” Wimonkan Kosumas, acting director-general of OSMEP, said.

Wimonkarn said OSMEP and the three organisations aimed to introduce the “SME National Champion” scoring system to be used as a selection process for SMEs who seek policy loans to ensure that the selected SMEs are ones capable of expanding their business but have been hampered by the lack of access to funding. 

The initial loan limit for this pilot project is expected to be around Bt1 billion to Bt2 billion with an interest rate of 6-7 per cent. SME Bank is willing to offer such a loan to SME “national champions” but it should not exceed Bt50 million.

Salinee Wangtal, chairman of the board of directors at SME Bank, said the government agency has to be the one to initiate venture capital because there is considerable risk for this type of fund-raising while the process of SME National Champion can also be applied here to lower risks. 

The organisations proposed the inclusion of small and medium businesses in the agriculture sector in the definition of SMEs along with the restructuring of the types of SMEs by including the life-cycle period from pre-start-up to go-global.