Bank of Thailand looking at ways to help SMEs hit by political turmoil

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BANK OF THAILAND
BOT looking at ways to help SMEs hit by political turmoil
ERICH PARPART
THE NATION

BANGKOK: -- The Bank of Thailand is still in discussion with other state agencies and the private sector regarding a proposed soft-loan policy and other added measures to help small and medium-sized enterprises affected by the political turmoil in the first half of the year.

However, BOT Governor Prasarn Trairatvorakul told reporters last week that the introduction of the soft-loan policy would not fix the real problem and, besides, the Bank of Thailand Act 2008 prevented such an action because it was regarded as bad financial discipline.

The policy was brought up by the Federation of Thai Industries, which believed that the introduction of the policy would help spur the economy by providing financial support for SMEs that were unable to expand their business due to the problem of liquidity.

"We have invited them [FTI representatives] to clarify [the situation to them] and we also have the intention to issue a formal letter to reply to their recommendations but at least we have already explained to them verbally," Prasarn said.

Prasarn said the soft-loan policy would not fix the liquidity problem for SMEs because a central bank survey had found that none of the SME operators had complain the cost of interest was too high while the BOT had already worked with commercial banks to provide some financial help to SMEs affected by the political turbulence.

"We have been in contact with commercial banks and encouraged them to provide support to their customers, and the banks have earnestly wanted to help by introducing special packages, extended payback time and temporary exemption along with lowering some financial fees for various services," he said.

Prasarn said the soft-loan measure would encourage a wrong financial culture because the introduction of a loan with a special interest rate that was lower than the market rate meant that someone would have to finance the difference and that would embolden bad financial discipline.

However, he said many SMEs still found it difficult to expand due to a lack of funds while commercial banks were now more careful when assessing loan applications, which meant the prolonged saga of SMEs struggling to gain financial access was still continuing.

The FTI has recommended that the Thai Credit Guarantee Corporation amend its guarantee regulation by providing a 30-50 per cent guarantee for SMEs seeking a loan from a commercial bank instead of the current 18 per cent, in order to provide them with a better chance to access finance.

The central bank said there were other measures that could improve the situation besides the FTI's recommendation.

Ronadol Numnonda, the BOT's assistant governor of the Supervision Group, said measures such as encouraging financial institutions to provide more options for SMEs, including joint-venture capital, and the implementation of the Business Guarantee Act could help SMEs that had low collateral

He said a bigger role by the TCG was important to help SMEs gain further financial access but he did not comment on whether the central bank had agreed with the FTI's recommendation for the TCG to increase its guarantee rate.

Source: http://www.nationmultimedia.com/business/BOT-looking-at-ways-to-help-SMEs-hit-by-political--30244329.html


-- The Nation 2014-09-29

[rickirs]

"... the soft-loan measure would encourage a wrong financial culture because the introduction of a loan with a special interest rate that was lower than the market rate meant that someone would have to finance the difference and that would embolden bad financial discipline."

CORRECT!

But this hasn't stopped the government from handing out soft loans to rice and rubber farmers with debt guarantees. So why a different policy for SME's? Is it because SME's do not have as high a political profile as the farmers to gainm special treatment? If so, maybe SME's need to develop a more political profile.

[HUAHIN62]

Sorry but its not political turmoil thats causing the SME's to have problems. The problem is less tourists, high debt load of Thai consumers and less exports and the reason for that is a downturn in the world economy, consumerism economic model and the coup. The protest is long gone and can't be blamed for the present position of SME's.