SMEs likely to be cautious with capital
SMALL AND medium-sized enterprises are expected to tone down the use of working capital for the purchase of fixed assets and inventory stocks as the economy is unlikely to reward such activities for the time being.
According to Kasikornbank, the market leader in SME lending, several businesses have had to undergo debt restructuring after using their working capital unwisely.
To help out its SME clients facing this problem, KBank has increased their grace periods to a maximum of 12 months from the previous five to six months, said Patchara Samalapa, executive vice president and head of SME business.
“However, many clients that underwent debt restructuring have re-entered the programme as they are still not strong enough amid the economic slowdown,” he said.
Year to date, the bank’s debt restructuring for SMEs is valued at between Bt70 billion and Bt80 billion, an amount that is expected to decline during the current second half of the year, Patchara said. The economy is not much better than it was in the first half, so SMEs should have learned that they have no need to buy stock or fixed assets, he said.
Working capital for SMEs accounts for two-thirds of KBank’s total outstanding loans of Bt540 billion.
He said the state of the economy was posing a concern for the bank because consumption, which is a key driver of gross domestic product, is facing a further slowdown. This affects SMEs, so the rate of non-performing loans in this segment is expected to climb.
In the first half, KBank’s SME business witnessed NPLs of 2.92 per cent, up from 2.48 per cent at the end of last year. NPLs might climb above 3 per cent by the end of this year, Patchara said.
KBank has lowered its loan-growth target for SMEs to 6 per cent, but he said it might not achieve the target if the economy gets even worse in the second half.
In the first half, the bank’s SME lending grew by 4 per cent, mostly to existing clients that had had withdrawn money from their credit lines for cash flow.
Total income of the bank’s SME business in the first half grew by 8 per cent, less than the expected 9 per cent, and most of it was interest income.
“We have to grow in [higher] potential segments such as construction and materials related to government projects, but several banks are aiming at the same segment, so that will have an impact on margins as well,” he said.
