Government savings banks will triple loans to SMEs

Thailand’s Government Savings Bank said last week it intends to stimulate growth and opportunity by tripling the amount of loans it will make next year to one of the most important drivers of the Thai economy – small and medium size enterprises (SMEs).

Government Savings Bank (GSB) President Chatchai Payuhanaveechai said his institution would set up a special lending team to focus solely on SMEs. He predicted that the bank would extend loans totaling $2.5 billion to such businesses, with about half the money being disbursed during the year. The bank defines SMEs as businesses that record $1.5 million or less in annual income.

In addition, the GSB would increase the number of centers it operates to provide services for SMEs across the nation to 80, a major expansion from the 13 centers it now operates, Chatchai said.

Although they rarely garner the attention that large corporations receive from media and investors, small and medium-size enterprises are the backbone of the Thai economy. They account for at least 37 percent of gross domestic product and employ over 80 percent of the workforce, according to statistics released by the Asian Development Bank (ADB) in 2014.

“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. Many large firms today grew from small and medium-scale enterprises. Access to the credit market is indispensable for SMEs to grow,” the ADB wrote.

Chatchai said the GSB would concentrate on lending to innovative SMEs, startups and small businesses in the tourism sector – particularly community-based tourism operators and franchises. Although more than 30 million tourists are expected to visit Thailand next year, the gains are generally gobbled up mostly by large operators such as big hotels.

Meanwhile, SMEs that are trying to compete in the tourism and other sectors are having difficulties obtaining loans and other types of financing from commercial banks because the track record of defaults among SMEs is higher than among large businesses and so they are considered a greater risk.

Some analysts have called for establishing a credit rating agency that focuses on SMEs so that commercial banks can make more informed and sounder decisions in deciding whether to lend to particular SMEs, but so far no such agency has been established.