Drought likely to keep Siam Kubota Leasing loan-growth flat
The expected severe drought this year will lead to farmers in the Central region delaying purchases of agricultural machinery, meaning demand for hire purchase at Siam Kubota Leasing (SKL) will experience another year of flat growth.
Suksri Panyakorn, managing director of SKL, said yesterday that the drought would affect farmers in the Central region more than in the Eastern region, and the Central region accounted for 12 per cent of its 350,000 customers nationwide.
Most of SKL’s customers are in the Eastern region, which requires water for in-season rice fields, unlike the Central region, which has double-crop fields, she said.
Each year, the company offers help to hire-purchase customers ahead of the drought, so non-performing loans (NPLs) are only 1 per cent of the outstanding loan of Bt67 billion.
"The drought will not significantly affect us in terms of NPLs, but it will have an impact on decisions to buy new machinery. Moreover, the economic slowdown in the country has not been positive to farmers’ incomes. We used to project growth of 5 per cent this year, but these circumstances might not support that. Hence flat growth for another year for us is better than a drop," she said.
The company projects new lending of Bt25 billion this year, some of which will come from existing customers who have already repaid their debts with the company and are borrowing again to buy new agricultural machinery.
More than 170,000 of SKL’s 350,000 customers have fully repaid their debts.
SKL lends to farmers who have an average annual income of Bt250,000, regarding these customers as those who can manage their investments and have good knowledge of farming.
Suksri said the company was expanding its customer base into other economic crops that have high demand for machinery. Farmers of sugar cane, cassava and palm make up 20 per cent of the total customer base, but rice farmers are still the major borrowers at 50 per cent.
The company is preparing new financial programmes to deal with a rising number of groups of farmers, following the government |policy that encourages farm clusters.
"We believe the clusters will bolster demand for hire purchase, and the loan conditions for them are the same as for general farmers," she said.
