Bigger budget needed for micro-enterprises

[Jonathan Fairfield]

Bigger budget needed for micro-enterprises

SUCHEERA PINIJPARAKARN

BANGKOK:-- THAI CREDIT Guarantee Corporation (TCG) has asked for a Bt13-billion budget from the Finance Ministry to extend the credit guarantee scheme to micro-enterprises to cope with higher demand, while the existing scheme worth Bt5 billion will be ended this year. Under the scheme, a micro-enterprise can request a credit line of Bt10,000 to Bt200,000 for a tenor of 10 years. The scheme was approved in 2014 but the process of credit guarantee has been implemented in the middle of this year.

Yarnsak Manomaiphiboon, chairman of TCG, said yesterday that the loan guarantee has been overwhelmed by micro-enterprises. Most are borrowers from the stated-owned Government Savings Bank (GSB).

The credit guarantee of Bt5 billion is not enough to cope with the high demand, hence the corporation has asked the Finance Ministry to consider extension of the scheme in terms of amount of loan guarantee as well as tenor.

The TCG had asked the ministry for a Bt13-billion budget, and wants the scheme to end by 2017.

Year to date, about 30,000 micro-enterprises have joined the scheme, seeking credit guarantee worth Bt3.6 billion.

"If the Finance Ministry approves the new budget, we hope around 135,000 micro-enterprises will access bank loans and when they have more cash flow, the circular flow of the economy in 2016 will better than this year," he said.

TCG acknowledges that each scheme should be continued to ensure the SMEs could survive, he said, and raised the example of the Portfolio Guarantee Scheme (PGS), which had a tenor of 7 years. The corporation will extend it for another 7 years to SMEs who are not strong enough to exit the loan guarantee, said Yarnsak.

Regarding the government's new stimulus of Bt100 billion in credit guarantee, about 5,000 SMEs have already availed of credit guarantee worth Bt20 billion. The office has no plan yet to ask the Finance Ministry for extension of the new credit guarantee.

The scheme will run through next June because the ministry is expected to evaluate the outlook of the economy in 2016 and the budget.

However, TCG believes the government will have to have additional measures to help SMEs.

For the new scheme, TCG will provide extra guarantee coverage of up to 22.5 per cent of none-performing loans and the loan guarantee fee has been waived for the first year.

Boontuck Wungcharoen, chairman of the Thai Bankers' Association, added that looking ahead, SMEs would continue to seek lending support for liquidity. Even though the loan guarantee from the new scheme will end next year, TCG has a normal scheme for SMEs who lack collateral.

The fragile global economy, especially the Chinese economy, and the drought are negative factors for SMEs next year. The association is worrying that both factors will affect the cash flow of SMEs.

He added that the Commercial Collateral Act, allowing banks to count receivables as collateral for mortgages, will be effective on July 2 next year, which will help SMEs access bank loan. However, the association expects it might take a year to educate SMEs about the act.

Source: http://www.nationmultimedia.com/business/Bigger-budget-needed-for-micro-enterprises-30273437.html

-- The Nation 2015-11-21

[Srikcir]

Allowing banks to count receivables as collateral for mortgages is a financial bubble waiting to burst. But the banks needn't worry as the government will pickup any tab for unrecovered defaults. And that will lead to more deficit spending.