WEDNESDAY, April 17, 2024

SMEs close down operations amid mounting debts

SMEs close down operations amid mounting debts

More small and medium-sized enterprises (SMEs) are being forced to cease business operations amid rising debts of over 61 billion baht.

Vice-president of the Federation of Thai Industries (FTI), Apichit Prasoprat, says that the FTI is currently in discussions with the Finance Ministry to coordinate with commercial banks and state agencies to expedite the resolution of debts for medium and small-sized businesses, which were previously considered good debtors but have faced liquidity problems due to the impact of Covid-19, resulting in overdue debts of more than 90 days.

These debtors have been categorised as “Code 21” by the National Credit Bureau and include 12,898 members of the FTI. Their total accumulated debt amounts to more than 61 billion baht, with 36 billion baht owed to commercial banks and the rest to state financial institutions.

Many businesses are heading towards having their debt classified as non-performing loans (NPLs), and if this situation is left unresolved, might have to shut down by the end of this year, which would adversely affect employment and the overall Thai economy.

If businesses that are not affiliated with the FTI are included, the Bank of Thailand’s data on SME debt classified under Code 21 brings the total to some 3 million cases, amounting to an estimated 300 billion baht of debt.

While the government must expedite debt relief measures for SMEs, deferring interest payments alone may not solve the problem entirely. Rather, there is a need to identify measures to ensure the repayment of both the principal and interest, Apichit stressed.

All parties must therefore engage with relevant agencies to restructure debts and find ways for these SMEs to access capital to manage their liquidity issues. Each case might need specific consideration to prevent these SMEs from becoming insolvent and having to close their business operations.

Apichit added that SMEs as a whole are currently facing increased financial costs due to the rising interest rates on loans. Additionally, the domestic purchasing power of Thais has weakened and this, coupled with delayed exports, is leading to a lack of liquidity for some, contributing to their financial strain.

SMEs classified under the Code 21 category face increasing difficulties in accessing capital, worsening their liquidity. Therefore, the resolution needs to be tailored individually to address these challenges promptly before they face closure, Apichit said.