The government has approved the state-owned Thai Credit Guarantee Corporation (TCG) raising its credit guarantee coverage for small and medium-sized enterprises (SMEs) to 30% of their loans from 18%.
The move is aimed at prodding commercial banks to lend more to SMEs.
Prime Minister Prayut Chan-o-cha, who chairs the Small and Medium Enterprise Promotion Committee, said yesterday's meeting approved in principle TCG’s proposal to extend the credit guarantee coverage to help SMEs access funding.
Proposals will now be forwarded to the cabinet for endorsement over the next two weeks. Once endorsed, TCG can provide compensation for up to 70% of the loans secured by SMEs if they turn into non-performing loans (NPLs), while commercial banks take responsibility for 30%.
SMEs have been the hardest hit by the faltering economy, and banks are reluctant to lend to them due to concerns about NPLs.
Bank of Thailand data show NPLs for SME loans had climbed to 149 billion baht at the end of March from 138 billion at the end of last year.
Special-mention loans, which are delinquent for 30-90 days, surged to 115 billion from 107 billion.
As of March 31, SME loans totalled 4.54 trillion baht.
SMEs' first-quarter GDP grew by 5% year-on-year to 1.39 trillion baht. That figure is expected to grow by 3-4% this year thanks to a domestic tourism rebound and the recovering US market.
The number is well above last year's SME GDP growth of 0.7% worth 4.4 trillion baht. SMEs contributed 37% of GDP.
Thai Bankers’ Association chairman Boontuck Wangcharoen said higher credit guarantee coverage would induce greater confidence among commercial banks in providing loans to SMEs.
On Tuesday, the cabinet approved a Finance Ministry proposal to earmark 4.1 billion baht to subsidise surcharges and lending rates incurred from a credit guarantee scheme for SMEs.
Some 875 million baht will go to pay surcharges incurred from credit guarantees for the SME loans from commercial banks, with 3.26 billion subsidising the 3% lending rates and surcharges from SME Bank.