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Apisak seeks lower loan costs for SMEs

Apr 22. 2018
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By The Nation

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Wants regulatory eff0rts by BOT so that interest rates can be lowered

Finance Minister Apisak Tantivorawong said he is worried that small and medium sized enterprises (SMEs) are continuing to experience high cost of doing business when compared to the larger companies. 

Solving the problem would need efforts by the the Bank of Thailand to regulate in a manner that would cause commercial banks to further lower their interest rates for SMEs, he said.

The differential between lending and deposit interest rates is about 2 per cent on average among the banks, which is not considered high. The lending rates for largesized business operators are very low, with some corฌporates having many loans levied at only a 1 per cent rate, whereas the rates levied on SME loans are quite high.

He added that the government is limited in what it can do to create more equitable conditions for SMEs. It could extend “soft loans”, which would be included in the annual spending budget. Though the curฌrent system is not working, the govฌernment cannot force commercial banks to lower their rates, said Apisak. 

One possible alternative, staterun banks, have different customer groups that bring with them higher risks. While commercial banks’ nonperforming loans average around 1 per cent of total outstanding loans, the average for staterun banks can average 34 per cent.

Apisak said that the current marฌket mechanism could be viewed as imperfect, and the supervisory agent must respond, as the policy rate could affect several factors. For example, if interest rates are low, higher ecoฌnomic growth could be expected. And that in turn would probably increase consumption and investment, along with higher inflation. That would not be good for people’s savings and for capital movement, he said.

He said the country’s costs, or those of the central bank, have been overlooked. If the rates are low, the costs of borrowing will also be low.

In the US, Europe and Japan, the interest rates have been lowered to nearly zero due mainly to costs. If the rates rise, the governments’ debt burden and that of the central bank will increase. It is the same in Thailand – if the rates are greatly reduced, it would not bring economic problems, instability and capital outflows.

In regard to the recent feed reduction announced by commercial banks, Apisak said that it came as expected from the beginning of e-payment systems, like PromptPay, which carry nearly zero costs.

“Commercial banks were told that their income will be less and will not lower interest rates. But finally, they must compete. They’ve cut fees to prevent customers from fleeing [to nonbanking institutions],” he said.


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