SCB watches SME debt revamp
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Targets double-digit loan growth in sector
Siam Commercial Bank (SCB) is ready to become more aggressive in its lending to small and medium-sized enterprises next year if such businesses demonstrate steady improvement with debt restructuring over the next six months.
Troubled SMEs that can successfully turn around their businesses and restructure their debts could fuel new demand for financing and become stronger, said Vipon Vorasowharid, first executive vice president and head of SCB’s business banking group.
The bank targets double-digit lending growth in the SME sector next year after expecting flat growth this year. In the first nine months of 2014, SME lending by SCB dropped by 2.9 per cent, with outstanding loans totalling Bt338.95 billion.
The government’s infrastructure investment projects will help spur SME cash flows, and at least three sectors – construction and materials, tourism, and food and beverages – will benefit greatly from the bright economic outlook in 2015, he said.
SCB started assisting distressed SMEs at the beginning of this year, and some of its clients have been unable to resume business as usual. But some have shown positive signs.
Recently the bank has found some SMEs asking for debt restructuring, as their own capital was insufficient to keep their businesses going, Vipon said.
“Supply chains in the automotive, agricultural and rubber [sectors are among the] SMEs that asked for debt restructuring.”
He said the bank would monitor their restructuring efforts for six to 12 months.
However, the political factor remains worrisome for SMEs. Moreover, the new collateral law is another concern for both SMEs and banks, and will have a significant effect on whether loans are granted.
The growth in SME loans next year will mainly come from existing clients, including those that have conducted debt restructuring, if they are able to resume their businesses.
For new SME clients, Vipon said SCB would focus on start-up enterprises by building connections and suggesting that start-ups open accounts with the bank so it can monitor its cash flows before deciding to provide loans.
“The problem with start-up enterprises is that they don’t know how to access loans. We have found that they require credit lines of Bt30 million to Bt40 million. Building connections with them is a key element for the bank in knowing their behaviour and ensuring that their debts will not go bad,” he said.
Another problem faced by small businesses is distribution of their products or services. SCB helps them through the annual “SCB-FTI Factory Outlet Fairs” in cooperation with the Federation of Thai Industries.
These fairs also facilitate business matching for small enterprises, he said.
