Food traders, processors 'begging for large working capital loans'

Small and medium-sized food traders and processors have been begging banks for huge working capital loans to buy up bumper crops from farmers during the winter harvest.

Kasikornbank, the largest SME lender, has seen hotter credit demand from exporters and processors of cassava, palm and corn, Patchara Samalapa, executive vice president of KBank, said last week.

“To ensure the purchasing power of SMEs in this segment, we should help them by offering loans, but we will provide loans for only those three crops because their prices are better than for rubber and rice,” he said.

Rice and rubber are crops that are subject to political whims, making for uncertainty, unlike cassava, corn and palm. 

Rice and rubber were not the focus of KBank.

In the first nine months, outstanding SME loans at KBank jumped 9 per cent, outstripping the bank’s target of 6-8 per cent. The bank might scale down lending in the rest of this year except for agricultural products, as lending to this category could help farmers.

However, Krungthai Bank still provides loans to small and medium-sized rice millers, as those customers need liquidity to buy rice from farmers, said Udomsak Rojviboonchai, a first executive vice president of KTB.

Loans to rice mills account for 10 per cent of the bank’s Bt350 billion SME loan portfolio.

The bank will continue approving loans to existing customers with experience but will advise new players that want to become rice millers that the timing is not good to do this kind of business because of the low price.

“For the new rice millers, they have to have enough capital to do this business before asking for a loan,” he said.

However, the bank expects the rice price will gradually improve after the end of the rice-pledging scheme. When supply is in line with demand, the price will become more stable.

Early this year, KTB helped SME rice millers, tractor dealers and fertiliser traders by extending debt repayment since they had been indirectly affected by the delayed payment to rice farmers who are their customers.

TMB Analytics has noted that low crop prices will affect the supply chain. SMEs in the agricultural machinery and agrichemical businesses will suffer from the lower purchasing power of farmers, who have falling incomes. 

Jiratchayuth Amyongka, senior executive vice president of CIMB Thai Bank, said the low prices on the other hand encourage traders to buy more crops for inventory.

Some SME customers in rubber and palm have demanded working capital to buy crops from farmers. 

The bank was ready to support these SMEs because the loans will help enhance cashflows not only for SMEs but also indirectly for farmers.

SMEs in the crop supply chain represent 15 per cent of the bank’s Bt49 billion SME loan portfolio.

“The 15 per cent is reasonable. We will maintain the ratio, as we are focusing more on manufacturing and trading,” he added.