Business leaders and government push SMEs to list

In a campaign intended to add greater depth and strength to the Kingdom’s economy, business leaders and government agencies are urging small and medium size businesses (SMEs), the backbone of the economy, to list on the Market for Alternative Investments in order to propel them towards greater expansion without taking on large debts.

The groups urging the SMEs to join the bourse include the Industry Ministry’s Industrial Promotion Department, the Commerce Ministry, the Office of Small and Medium Enterprise Promotion, the Federation of Thai Industries and the Thai Chamber of Commerce.

The Market for Alternative Investment (MAI) expects at least 26 companies to list on its exchange in the next three years with a combined market capitalization of $570 Million, said MAI senior executive vice-president Santi Kiranand.

That would still represent a tiny fraction of the total number of SMEs in Thailand, suggesting the MAI, which was launched to attract smaller enterprises, still has room for tremendous growth. Commencing operations in 1999, the MAI had a market capitalization of roughly $5.4 billion in mid-2014 and now has more than 150 companies listed on its bourse.

Santi said the companies expected to list on the MAI are in the service, food and healthcare sectors. Conditions for listing on the MAI include $1.4 million in capital and a net profit of $285,000 for at least one year.

As far as SMEs are concerned, there were 2.7 million SMEs in the Kingdom in 2012, the latest year for which statistics were available, according to the Asian Development Bank. They account for 98.5 percent of total enterprises. Also that year, SMEs accounted for 37 percent of gross domestic product and employed 80.4 percent of the workforce. Thai SMEs also contributed to 28.8 percent of total exports and 31.9 percent of total imports by value that year.

“Since SMEs are so important for the Thai economy, it is important to increase their resilience. One of the ways to increase their resilience is to provide them with stable finance. SME credit, which amounted to 32.8 percent of total commercial bank loans in 2012, is still small in scale,” the Asian Development Bank wrote on its website.

“While the strong appetite of SMEs for growth has shifted bank lending attitudes from large lot transactions with large firms to retail financing and portfolio guarantee schemes and helped the trend of SME credit in Thailand, the lack of collateral is still a critical barrier for Thai SMEs in raising business funds,’’ the ADB wrote.

Hence the move by Thai authorities to encourage SMEs to list as another means of accessing funds to grow.