SME Bank to increase registered capital by another Bt1 billion for innovative JVs

“Our policy since September 8, 2015 through to the end of this year is to finance joint ventures with such SMEs to the tune of Bt2 billion. Part of the investment budget will come from registered capital of Bt1 billion raised last year. The rest will be raised in the second half of this year, given the bank’s management of our non-performing loans [NPLs] to meet the Finance Ministry target of no more than Bt18 billion in the first half,” SME Bank president Mongkol Leelatham said during an interview with The Nation last week.

Currently, the bank has NPLs of Bt22 billion, representing 23 per cent of its outstanding loans – sharply down from 40 per cent in June last year. 

At present, the bank has joint ventures with four businesses at a combined investment cost of Bt50 million. 

It is also studying investment in another 20 SMEs at a combined cost of Bt350 million, in deals expected to be finalised this year, he said. 

The joint-venture policy is focused on SMEs engaged in innovative business and which need capital for business expansion in order to drive their long-term growth. 

Investment will be in both SMEs and start-up businesses, in line with government policy to support both types of entity as a dynamic new industrial sector to propel the country forward towards an innovation-based economy. 

Meanwhile, SME Bank’s business strategy is to provide loans of up to Bt15 million per case, as it has to focus on those SMEs that cannot access finance from commercial banks, Mongkol added. 

“We have to facilitate the measure to support SMEs that need the funds to drive their business, but not by doing so in competition with the commercial banks. This will also help us to manage our lending and our NPLs,” the bank president explained.

SME Bank has also set a target of no more than 5 per cent for NPLs from new lending. 

This follows on from its success in keeping NPLs for new loans below the 1-per-cent mark since the middle of last year, he said.

It also forms a key part of SME Bank’s restructuring of its business with a view to slashing its overall NPLs from 40 per cent in June last year to below 20 per cent by the end of this year.

Mongkol said the bank was reducing its NPLs by negotiating with NPL customers to restructure their debt, as well as supporting them to restructure their business in order to generate returns so that they can repay what they owe. 

Meanwhile, the bank’s strategy is to focus more on being a development bank, as a result of which it not only provides loans, but is also an adviser for customers on how to do business, and training them in marketing, accounting and management, the president said. 

This helps clients to manage their business properly and generate healthy financial results, giving them the chance to grow into medium-sized and even large companies in the long run, he added. 

Given its business strategy, the bank targets new lending worth Bt35 billion this year, around 17 per cent higher than lending Bt30 billion that was advanced in 2015. 

The bank provided new loans worth Bt9.7 billion during the first quarter. 

“We believe we will reduce our NPLs to below 20 per cent following our restructuring plan, as promised to the State Enterprise Policy Office, and that we will also achieve our new-lending target for this year,” Mongkol said.