Bankers propose hike in loan guarantee for SMEs

The TCG at present takes responsibility for up to 18 per cent of the loans to SMEs. At a meeting of the Joint Standing Committee on Commerce, Industry and Banking, it was concluded that loan guarantees to SMEs in the agriculture sector should be increased to 50 per cent of lending, while for SMEs in the general sector they should rise to 30 per cent, TBA chairman Boontuck Wungcharoen said.

The association will submit the proposal to Deputy Prime Minister MR Pridiyathorn Devakula, who oversees the TCG, Boontuck said. He added that expansion of loan guarantees was expected to help SMEs, which would also ensure healthy growth for the economy.

The TCG currently limits credit guarantees to an SME at Bt40 million.

As long as gross domestic product grows by only 3-4 per cent a year, the country cannot escape from the middle-income trap. The private sector must increase its competitiveness together with help from the government, he said.

Bank of Thailand Governor Prasarn Trairatvorakul said the central bank was not planning any additional measures to support the growth of the economy, as it believes the depreciation of the baht could help drive growth. However, there are many factors behind the depreciation of baht, not just the recent policy-rate cut, he said.

Pridiyathorn said the policy-rate cut could help balance the money market and benefit Thai exports, but the impact on exports would depend on other economic factors as well.

The government is hoping the currency exchange will help carry on domestic economic growth more than relying on interest-rate cuts.

He added that the government expected the baht to depreciate further.

In addition, the nano-finance scheme launched by the junta-led government is expected to attract more lenders and open a channel for low-income people to access funds.

About 15 companies have sought nano-finance licences from the Bank of Thailand, and the central bank has approved five or six of them.