Push for bank funds for SMEs

“Interest rates are not important for SMEs. The key thing is that they are unable to get funds from banks, making several SMEs have to borrow from non-financial institutions instead, so the association has to talk about this to help SMEs to get loans,” chairman Boontuck Wungcharoen said yesterday.

Only 700,000 of the total 3 million SMEs have availed of bank loans and after a crisis, and what SMEs will face is the tightening of banks out of concern for non-performing loans of SMEs during an economic slowdown.

In every economic crisis, SMEs are the first to be affected and when the crisis blows over, financial institutions will be more cautious in extending credit to SMEs in order to lower expected NPLs. SME loans in the banking system edged up only 1-2 per cent last year and are expected to reach 6-8 per cent this year.

Last Wednesday, the Bank of Thailand cut the policy rate by 25 basis points to 1.75 per cent in a bid to help spur the economy. Two commercial banks – Siam Commercial Bank and Bangkok Bank – followed suit by trimming their loan rates. Boontuck said the policy-rate cut would not influence the growth of bank loans and some banks that reacted by cutting rates made the decision based on the market situation. However, banks have to consider several variables before taking such action, such as supply and demand.

Boontuck, who is also the chief executive officer of TMB Bank, said the bank targeted SME loan growth of 20 per cent after the International Finance Corp, a member of the World Bank Group, offered credit guarantees for SME loans.

That widened the coverage of loan guarantees to 60 per cent from the 20 per cent guaranteed by the Thai Credit Guarantee Corporation.