Monday, August 26, 2019

SCB aims to keep SME non-performing loans at below 8%

Jul 23. 2019
SCB’s chief SME banking officer Pikun Srimahunt: “The biggest challenge facing SMEs is their ability to adapt to technological change and diversify their customer segments to mitigate risks.”
SCB’s chief SME banking officer Pikun Srimahunt: “The biggest challenge facing SMEs is their ability to adapt to technological change and diversify their customer segments to mitigate risks.”
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By PHUWIT LIMVIPHUWAT

THE NATION

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Amid rising non-performing loans (NPL) from small and medium-sized enterprises across Thailand, Siam Commercial Bank (SCB) aims to keep their NPL levels at below 8 per cent this year by developing an SME Ecosystem to promote sustainable business practices both for its existing and potential clients.

 

 

 

In the first six months of 2019, SCB’s existing NPLs from SMEs stood at 7.8 per cent, with new NPLs at around 0.75 per cent, said SME banking officer Pikun Srimahunt at a press conference on Monday. 

“Our aim is to keep NPL levels at below 8 per cent through 2019,” she said. 

However, Pikun admitted that SMEs faced intense competition from large corporations both locally and overseas in the first half of 2019.

In the first quarter, wholesale business and SME loans contracted by 1.2 per cent year on year, but NPLs increased by 7.4 per cent, according to TMB Analytics.

“Wholesale SMEs face worrying financial issues as they are being out-competed by large businesses that offer cheaper prices by economies of scale,” said TMB Analytics chief Naris Sathapholdeja during a separate interview. 

Moreover, SMEs are expected to struggle even further if the incoming government implements its campaign promise to hike the minimum wage to Bt400, according to Supant Mongkolsuthree, chairman of the Federation of Thai Industries.

The manufacturing sector representative stated that SMEs will struggle to compete with big businesses as a rise in the minimum wage will increase their costs disproportionately when compared to large corporations. 

However, Pikun contends that the increase in the minimum wage to Bt400 will not present a significant obstacle for SMEs if they are able to utilise new technologies and adjust their prices in accordance with their costs.

“The real challenge for SMEs, which has been reflected in the NPL levels, is their inability to diversify their customer base and make use of new technology to cut costs and increase online visibility,” Pikun said. 

For example, SMEs which only rely on exports to China will struggle as the US-China trade spat continues. Meanwhile, SMEs which are able to diversify their exports to other regions such as the CLMV (Cambodia, Laos, Myanmar and Vietnam) bloc are more likely to perform better, she explained. 

Given the rising level of bad loans, SCB has developed a hands-on approach to manage their NPL levels by establishing an SME Ecosystem to support their clients and promote more sustainable business practices. 

“The biggest challenge facing SMEs is their ability to adapt to technological change and diversify their customer segments to mitigate risks,” Pikun claimed. 

Hence, the bank will start monitoring their clients more closely and notify clients that are at risk of creating NPLs. 

In our SME Ecosystem, she stated, we offer services with partners to put these enterprises on e-commerce platforms such as Amazon and make their businesses visible on Google Maps by using Google My Business.

Furthermore, the bank has established the SCB SME Academy, which will offer programmes to train these enterprises throughout the country free of charge. The academy also has a mentor programme to match SMEs together and exchange valuable business know-how.

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