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Published on October 24, 2007

During the past year, almost everyone in Thailand has realised that an unstable political environment can wreak havoc on many small and medium-sized enterprises (SMEs), which constitute 99 per cent of an estimated 1.87 million businesses.

Consumer and capital spending have lagged as people wait for the political fog to clear.

Early this year, the SME Development Bank recognised that many of its borrowers were having trouble making their interest and principal payments on existing loans.

Pongsak Chewcharat, the SME Bank's president, said his bank had been developing and implementing many new loan and advisory programmes this year to help struggling SMEs.

"They have not only been hurt by an unstable political environment but also by persistently high oil prices and a strong baht that has really cut into their cash flows," he said.

A critical mission of the SME Bank, Pongsak said, was constantly developing new strategies that will help SMEs survive and thrive in all kinds of economic and political environments. "We've developed several programmes that specifically address key concerns."

For instance, in April the SME Bank's board approved a massive plan to provide business-recovery liquidity loans for SME borrowers that were having difficulty make their loan repayments. "These are good businesses that benefit the country and we wanted to provide them with every opportunity to succeed," he said.

Prior to this announcement, the SME Bank had stated in the local press that its non-performing loans had reached Bt19 billion, of which 75 per cent were to businesses suffering from genuine liquidity problems. "It's the duty of our bank to help them," Pongsak said.

The SME Bank had set aside Bt1 billion for a "loans to facilitate business recovery" programme. "Most of these loans have been issued for working capital and to help borrowers complete unfinished projects."

These short or long-term loans, Pongsak said, were being issued for maximum loan periods of five years and must be fully collateralised by the borrowers or guarantors. "This programme has really helped many of our SMEs and more importantly, has done much to maintain the country's economic growth."

In addition to developing new programmes to provide SME liquidity, he said another key element was ensuring that this country's SMEs stay ahead of the competitive curve with the latest technological developments. "Our SMEs must have the resources to install global-quality technologies if they want to compete successfully."

These technologies will help SMEs become more cost competitive and more efficient. "We are not the lowest-cost labour market in the world and our companies must always look for ways to reduce costs or produce more efficiently," he said. 

The SME Bank has an Energy Conservation Loan programme that was established jointly with the Energy Ministry to encourage investment in energy saving. "This programme has helped many of our borrowers cope during this period of persistently high energy prices."

Under the programme, borrowers can use the funds to purchase technologies that improve fossil-fuel burning efficiency, mitigate energy loss, recycle used energy and many other energy-conservation measures, including installations to convert to alternative fuels. "The borrowers can use these loans for any energy-conservation measures stipulated by ministerial regulations," he said.

A third key loan platform that has been designed to improve SME productivity is the bank's participation in the Office of Small and Medium Enterprises Promotion (Osmep) and the Federation of Thai Industries' Machine Funds loan programme for SMEs.

"These loans are designed to help our SMEs acquire the latest production equipment and accompanying technologies," he said.

This programme is buttressed by a 3-per-cent interest rate subsidy from Osmep. "Each loan will be subsidised for five years," he said.

 To compete successfully in today's globalised environment, Thai SMEs must be able to offer their customers high technology and low prices. "They must be able to use new technology to build innovative products at lower costs in order to obtain a sustainable competitive advantage," he added.

The Nation