Call for higher ceiling on SMEs loan guarantee
The Thai Bankers' Association (TBA) has called on the Office of Small and Medium Enterprises Promotion to raise the guarantee ceiling provided by the Thai Credit Guarantee Corporation (TCG) from 18 per cent to 30 per cent of a loan or credit line for only
The TBA is also seeking assistance – only for industries with good potential – to provide adequate liquidity for business operations and to curb the high missed loan repayment rate of 4.5 per cent by local SMEs in the first quarter of this year.
Boontuck Wungcharoen, chairman of the TBA and chief executive officer of TMB Bank, said yesterday that the 18-per-cent cap may seem adequate to the Finance Ministry, but the economy has not improved sufficiently to lessen the financial burden of the one million local SMEs that need over Bt4 trillion in loans from commercial banks to keep them in business during the current slowdown.
A higher loan guarantee ceiling will ease the burden for banks to establish bad loan reserves for SMEs that are struggling to make their instalments.
Local banks have no problem with approving loans for local SMEs in line with the TCG’s terms and conditions, as up to 30 per cent of the loans are guaranteed by the International Finance Corporation.
The banks are ready to provide financial support to local SMEs with potential.
In the past, banks set bad loan reserves as high as 150 per cent, which does not affect their profitability.
However, if the banks face rising bad loans in the future, they will sell off the bad assets, depending on the situation and timing. The banks are closely monitoring its bad loan accounts, he added.
Kasikornbank Bank agrees that TCG’s loan guarantee ceiling should be hiked to 30 per cent to support the survival of local SMEs. However, banks give lending priority to SMEs with good potential to lessen the risk of default.
Banks are also seeking to extend the loan term from the TCG by one more year. Kasikornbank Bank is carrying over Bt10 billion in TCG-guaranteed loans.
