Picture courtesy of Bangkok Publish

The Bank of Thailand is considering the institution of credit guarantee schemes for small and medium-sized enterprises (SMEs) to boost their entry to financial institution loans. Suwannee Jatsadasak, assistant governor for the supervision group, said that the central financial institution is analysing varied credit guarantee schemes carried out in different nations, together with Japan and Taiwan. These nations provide extra in depth credit guarantee packages to SMEs than Thailand, primarily based on the mutual sharing of advantages and dangers between companies and monetary establishments. Subsequently, these schemes necessitate much less authorities finances assist.

The Bank of Thailand offered information revealing a 0.3% contraction in financial institution loans in 2023 in comparison with the earlier yr. SMEs with a credit line of lower than 500 million baht every skilled a 5.1% year-on-year contraction in loans within the third quarter of 2023, following a 5.5% lower within the previous quarter, reported Bangkok Publish.

Suwannee Jatsadasak famous that the capability of SME loans has just lately fallen from round 10 million baht per firm. With a weaker monetary capability within the SME sector resulting from an uneven financial restoration, these companies now have much less entry to financial institution loans. She additional defined that banks have adopted a extra cautious method to granting loans to SMEs because of the elevated credit threat on this phase amidst financial uncertainties.

Credit guarantee schemes align with the necessities of SMEs and allow monetary establishments to higher assess the dangers related to SME loans, she added. Central financial institution information from the fourth quarter of 2023 revealed that SMEs’ non-performing loans (NPLs) elevated to six.66% from 6.64% within the earlier quarter. SME particular point out loans, outlined as loans overdue from 30 to 90 days, rose to 11% from 10.6% over the identical interval.

Demand for unsecured loans, which embody credit card and private loans, has additionally risen amongst SMEs. “This can be one cause why the Nationwide Financial and Social Improvement Council (NESDC) proposed the central financial institution waive the minimal cost for credit card money owed,” Suwannee Jatsadasak commented.

Central financial institution’s measures to deal with credit card debt

The central financial institution has raised the minimal cost of credit card loans to eight% of the overall stability because the starting of this yr after the ratio was halved to five% in the course of the pandemic from the standard stage of 10%. The central financial institution intends to revive the required minimal cost to 10% subsequent yr.

Suwannee Jatsadasak highlighted that the central financial institution will focus on minimal credit card funds with the NESDC since any improve would affect some cardholders, together with each people and SMEs. “Nonetheless, protecting the ratio at a low stage would affect debtors in the long run as a result of they should shoulder a better monetary burden,” she concluded.

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