The Bank of Thailand is examining a three-party credit guarantee model similar to those utilized in other nations to enhance financial support for Thai small and medium-sized enterprises (SMEs).
During a seminar organized by the central bank on Tuesday, Somchai Lertlarpwasin, the assistant governor for the financial institutions policy group at the regulatory body, mentioned that the Bank of Thailand has assessed credit guarantee systems in South Korea, Taiwan, and Malaysia. These systems involve cooperation among government entities, debtors, and SMEs.
Mr. Somchai expressed that this model could potentially improve the accessibility of funding for Thai SMEs.
In Thailand, the credit guarantee system is overseen by the Thai Credit Guarantee Corporation (TCG) in collaboration with financial institutions.
Research revealed that these countries levy credit guarantee fees based on the risk profile of SME clients. For example, South Korea’s fees range between 0.5% and 3%, while Malaysia’s average fee falls within the 0.75% to 4% range.
Moreover, these nations extend credit guarantee services for both loans and bonds.
Mr. Somchai highlighted that the tripartite model not only fortifies the financing foundation of the credit guarantee system but also delivers holistic advice to SMEs, thereby fostering sustainable business growth.
Chaiyot Tunpisut, first senior vice-president at Kasikornbank, emphasized the significance of ongoing financial backing from the government’s credit guarantee. Notably, South Korea and Taiwan allocate 0.2% of their fiscal budgets for credit guarantees.
Mr. Somchai Jitsuchon, research director at the Thailand Development Research Institute, proposed that regulators revise TCG’s regulations to permit credit guarantees for entities beyond financial institutions. Additionally, he suggested TCG develop a digital framework to broaden SME credit assessments from existing portfolio data to individual data, thereby expanding access to credit guarantees for smaller SMEs.
TCG President Sittikorn Direksoonthorn noted that the company has extended credit guarantees to approximately 800,000 SMEs, with around 400,000 being impacted by the pandemic.
Of the 400,000 affected SMEs, 70% are micro-businesses, each receiving credit guarantee amounts ranging from 90,000 to 120,000 baht, bolstering their liquidity.
Mr. Sittikorn remarked that while there are roughly 3.2 million SMEs in the country, only a fraction can avail themselves of bank loans and TCG’s credit guarantees.
“TCG has developed products to facilitate SMEs in accessing financial services,” he added.
