SME demand for soft loans to exceed govt target

PHOTO: SME demand for soft loans to exceed govt target

THAILAND - Small and medium-sized enterprises affected by the government's wage-hike policy are expected to demand soft loans exceeding the government target of Bt20 billion (S$790 million), Wiboon Permarayawong, president of Thai Credit Guarantee Corporation (TCG), said yesterday.

The TCG, a state-owned agency, has been joining hands with the Small and Medium Enterprise Development Bank of Thailand in a government loan scheme to support small businesses adversely affected by the hike in minimum wage to Bt300 a day.

Two months since the implementation, the SME Bank has loaned Bt2.05 billion, with 100-per-cent loan guarantee by the TCG, said Wiboon. The government offered Bt7.5 billion loan via the SME Bank in the first phase for those who want to buy new machines and improve their productivity in order to offset the rising cost of wages. SMEs can apply for the loan until April next year and the government plans to offer another Bt12 billion in the second phase when the new minimum wage comes into effect nationwide next year.

"The demand for soft loans is expected to be higher than Bt20 billion as a lot of SMEs will be affected by the rising cost of labour," said Wiboon. So far, loan demand is not high as the new rate of minimum wage applies to only seven provinces but loan demand is expected to jump when it applies across the country next year.

The wage-hike policy recently sparked a conflict at the Federation of Thai Industries as representatives of SMEs voted to oust the chairman who was accused of not protecting the interest of smaller businesses. The wage hike is also not popular among Japanese investors. Labour-intensive industries such as garment and leather products are expected to be hit hard.

Wiboon also said the TCG is currently asking the Finance Ministry to allow it to provide credit guarantee to small businesses that expand their production and services to foreign countries, members of Asean in particular.

Currently, the TCG provides only guarantee to SMEs operating in the country. It approved credit guarantee for bank loans amounting to Bt70 billion from January to October this year, surpassing the target of Bt49.2 billion. Its popular product - "portfolio guarantee scheme" - amounted to Bt23.99 billion from January to November this year. Wiboon said he could beat the target of Bt24 billion for a full year. The TCG works with many banks that provide loans to SMEs. It will cover losses of up to 15 per cent of each bad loan.

"We actually operate on a loss as we collect only 1.75 per cent guarantee premium but our average claim payment is 3.5 per cent, so the government has to provide subsidy," he said. Now, even start-up firms can access bank loans as the TCG provides credit guarantee to them, he said.

In 22 years of operations, the TCG has provided guarantee for accumulated bank loans of Bt220 billion, said Wiboon.