SMEs to get major liquidity boost

Finance Minister Suchart Thadathamrongvech yesterday said the government would inject liquidity worth about Bt90 billion via stateowned banks into the private sector, starting next month.

The measures for the property sec¬tor include a possible oneyear exten¬sion of tax incentives, which are due to expire in March.

The government wants to support SMEs and the real estate and farm¬ing sectors, said Suchart.

The Government Savings Bank (GSB), the Bank for Agriculture and Agricultural Cooperatives, the Government Housing Bank (GH Bank) and the Small and Medium Enterprise Development Bank of Thailand (SME Bank) will be the key tools used by the government for liquidity injection.

Suchart also said representatives from the property sector had pro¬posed that he help the industry via tax incentives for homebuying, a low interestrate policy, and soft loans to be extended by the GSB and GH Bank.

They also want the government to accelerate megaproject investment and have urged it to take measures to boost consumer confidence.

Suchart said he would consult sen¬ior officials from the Finance Ministry, stockexchange regulators and the central bank about the over¬all economic situation on Thursday.

Meanwhile, the ministry yester¬day announced the injection of Bt30 billion of liquidity into SMEs and the planned merger of the SME Bank with the Small Business Credit Guarantee Corp.

The Bt30billion package is part of the Bt90billion package men¬tioned by Suchart.

Deputy Finance Minister Pradit Pataraprasit told the press that the SME Bank would lend about Bt10 billion to SMEs at a low interest rate, or at the minimum lending rate, cur¬rently 7.25 per cent.

Small firms facing a shortage of capital can apply for loans from November 11, with each business entitled to borrow between Bt300,000 and Bt10 million. Debt repayment will be up to seven years, as they are expected to be adversely affected by the global financial crisis, Prasit said.

The SME Bank will also make available venture capital worth Bt500 million for investment in startups. The plan is to sell shares back to company owners later.

Loan guarantees will also be offered to SMEs seeking credit from commercial banks. Such guarantees are estimated to total about Bt4 billion.

The Finance Ministry will ask the National Science and Technology Development Agency to help SMEs upgrade their technology or obtain technical assistance. The agency tar¬gets expanding its services from the current 250 firms a year to 2,500, said Pradit.

Pradit said he would merge the SME Bank with the Small Business Credit Guarantee Corp in order to strengthen the former.

He added that he would today ask the Cabinet to approve the package of measures to assist SMEs.

The SME Bank has suffered from a high level of nonperforming loans (NPLs), currently estimated to be about 50 per cent of its outstanding credit.

Somchai Sakulsurarat, adviser to Pradit, revealed that about 10 to 20 per cent of SME Bank's bad debt worth Bt20 billion would be sold. The bank will hire an outsider to manage 40 per cent of the remaining bad debt, with the rest managed inhouse.

After the merger, SME Bank's assets would be about Bt54 billion and its capital would increase from Bt8.8 billion to Bt9 billion, as the Finance Ministry would inject new capital. Its debts are estimated to be Bt45 billion.

With new capital from the ministry, the bank is expected to be able to lend up to Bt30 billion, said Somchai.

The merger procedure is expect¬ed to take about nine months to com¬plete.

Pradit expressed hope that the new management team would be able to bring SME Bank's NPLs down to about 15 per cent within four years.

The government will not inter¬vene in the bank's management, he said, responding to criticism that past political intervention had caused a huge level of bad debts at the institu¬tion.

He said the government needed to support SMEs because the industry plays an important role in both the export sector and the overall economy.

The output of SMEs is estimated to be about 40 per cent of gross domestic product, with the sector accounting for 30 per cent of export value. It is also estimated to hire 80 per cent of the country's nonfarming labour force.