Banks, not direct govt funding, need to support SMEs: deputy PM

At a seminar on SME business opportunities conducted by the Matichon Group, he said the problem of access to finance would eventually be solved by commercial banks as they compete to provide funding to the growing numbers of SME customers. 

SMEs can also help themselves in this aspect by making sure they have the capability to expand before asking for loans. If they can demonstrate that they have the ability to repay their debts, they deserve to gain access to financing, he said.

There are 2.7 million SMEs in Thailand, whose production contributes around 30 per cent of gross domestic product. Of that total, 99 per cent are small businesses, and 684,000 of them employ around 10 million people, which accounts for 80 per cent of all employment outside the agriculture sector.

“If I were the chairman of the Federation of Thai Industries, I would go and talk to the chairman of the Thai Bankers’ Association, since SMEs’ problems with gaining access to finance is more related to the commercial banks than to the state-run SME Bank,” Pridiyathorn said. 

“There are many ways to ease the debt problems of SMEs with which the commercial banks could help, such as extending loan periods or providing the lowest interest rate for their SME customers. These solutions could be negotiated if all sides wanted to help each other,” he said.

Pridiyathorn stressed that commercial banks had extensive experience supporting SMEs and he was not worried about the potential increase of non-performing loans from the increase of competition to lend to SMEs. Commercial banks are capable of managing their own risks, and the current rise of NPLs is largely caused by superfluous spending on credit cards, not loans to SMEs.

The Bank of Thailand yesterday revealed that the NPL rate in the whole banking system had increased from 2.15 per cent at the end of last year to 2.34 per cent in the third quarter of 2014.

Pridiyathorn also explained the government’s ideas of setting up a national broadband system, a national market data centre, and a national trading website similar to Alibaba. They would help SMEs more than large corporates since the latter already have access to such data and facilities.  The best way to support SMEs right now is to help them cope with the changes of demand and customer behaviour that was brought about by the digitalisation process by providing them with information-technology support and technological know-how, he said.

Supant Mongkolsuthree, chairman of the FTI, said he was satisfied with the government’s commitment to SMEs, and their problems gaining access to finance should ease once state agencies’ policies to support SMEs are put into full force. The biggest concerns right now are for SMEs in the retail market because of rising costs of production while sales numbers are down.