Slow economic recovery, new players top SME concerns

The subdued economic recovery and intense competition from new competitors that have strong liquidity were the most worrying factors for 66.2 per cent of the SMEs polled, up from 50.8 per cent when the previous survey was conducted in the third quarter. 
The percentage – the highest since TMB has been surveying SMEs about their business sentiment – is mostly due to the concerns of SMEs in the central and northeastern provinces, Benjarong Suwankiri, head economist at TMB Analytics, the research unit of TMB Bank, said yesterday.
SMEs said they were particularly concerned about new rivals with stronger cash flows, as this could negatively affect their own competitiveness.
Cash flow is a worry for SMEs in all provinces, while a shortage of skilled labour is the top concern for businesses in the eastern provinces, and natural disaster for enterprises in the South, he said.
For current confidence, the TMB-SME Sentiment Index in the fourth quarter stood at 40 points out of 100, against 41.9 points in the previous quarter – the first improvement since the first quarter of last year.
However, confidence for the next three months, January to March, dropped to 50.9 points from 54.1 in the previous survey. 
TMB Bank expects SMEs’ performance overall to have bottomed out last year, with the prospects of a recovery for the sector in 2017.
This is based on an assumption of gross domestic product expanding 3.5 per cent this year, which implies potential SME business growth of 3 per cent, the economist said.
Non-performing loans (NPLs) in SME banking will still be closely monitored, as financial institutions remain concerned about the quality of SMEs loans and are firmly focused on risk management, especially in regard to enterprises with an annual turnover of between Bt50 million and Bt100 million, he added.
Overall SME NPLs could peak at 3 per cent of outstanding lending in the middle of the year, from 2.8 per cent in the third quarter of last year. 
At TMB, the current NPL ratio for SME clients is 2.52 per cent-2.57 per cent, Benjarong said.
Total SME loans in the banking industry are in the range of Bt700 billion to Bt800 billion for some 2.9 million client businesses across the country.
“We are worried that SMEs in fishery and transportation businesses will face rising operating costs from the hike in fuel prices, while the recent flooding in the South will put pressure on the purchasing power of consumers in agricultural businesses,” he explained.
SMEs should adjust their business model to ride the e-commerce trend and benefit from the government’s investment programme, he suggested.