SME lending to get a boost

The government’s Bt100-billion soft-loan programme for small and medium-sized enterprises could help some banks meet or even exceed their SME loan-growth targets this year.

Siam Commercial Bank expects its new SME lending this year to reach Bt120 billion after the government launched the soft-loan scheme, said Vipon Vorasowharid, first executive vice president and head of SCB’s business banking group.

Previously, SCB expected its new SME loans to end the year at Bt100 billion after recording a Bt50-billion figure in the first half.

The economic slowdown has reduced the confidence of SMEs, causing them to tone down their investments and reduce credit withdrawal with the banks, which is why SCB had set its new-loan target at around Bt100 billion. However, after the soft-loan programme offering interest rates of 4 per cent per annum was launched, SMEs were encouraged to apply for loans, he said.

Some SMEs had planned to invest next year but have moved up their expansion schedules because of the soft-loan programme to the current quarter of this year. SCB now expects new lending in the second half to reach Bt70 billion, of which Bt15 billion will come from the soft-loan scheme, Vipon said.

SCB was the first bank to meet the requirements of the soft-loan programme administered by the Government Savings Bank, and has already withdrawn Bt6 billion from the GSB to finance 300 SME clients.

Vipon said that after meeting with the Thai Bankers’ Association over the loan conditions, SCB was able to speed up the process of supporting SMEs that require new funding to expand.

The credit line to SMEs is limited to Bt50 million under the programme, and this money will not be offered to SMEs that want to refinance existing loans.

"In general, customers who want to refinance will need new loans that meet the criteria, but the interest on the pre-existing loans will be at normal rates," he explained.

Thanks to the soft-loan scheme, the bank should be able to maintain its loan-growth target of 5-7 per cent this year. However, there is little chance of double-digit growth in SME lending next year given the current economic circumstances, Vipon said.

Land and Houses Bank intends to grant Bt3 billion in soft loans, said senior executive vice president Sutharntip Phisitbuntoon.

Early this year, LH Bank targeted loan growth of 25 per cent, but after the first nine months saw growth of 15 per cent to outstanding loans of Bt142 billion, it decided to cut the target to less than 15 per cent. However, the availability of soft loans should help LH Bank achieve loan growth this year of around 15-18 per cent, she said.

SMEs have faced difficulty in tapping funds because of natural business risks. Some have benefited from the government’s policy to enhance access to funding, including Foresta, the operator of Ley Cafe in Prachuap Khiri Khan.

The company was able to get off the ground with a loan from the Small and Medium Enterprise Development Bank that is guaranteed by Thai Credit Guarantee Corporation.

"We are a small company and, if we had not been granted a guarantee from the TCG, it would have been difficult to get a loan to expand the business. This is a good way to support small and medium-sized firms in expanding their business and creating sustainable growth," said Anonwat Aeilaor, owner of Foresta.