Exim Bank seeks capital boost to lend to exporters' clients

Bank president Apichai Boontherawara said that by the end of this month, he would ask the board of directors to approve the plan to extend loans to foreign buyers, which he said was standard practice at Ex-Im banks in the US, China and Japan. Under former prime minister Thaksin Shinawatra, Exim Bank approved a Bt4-billion loan to Burma for a similar purpose.

"It should boost exports, as buyers are having trouble obtaining credits from banks in their respective countries," Apichai said. "If we receive additional funds, our lending capacity could be 10 times higher," he said.

Many Thai exporters still have market potential, but their clients are suffering a credit squeeze, the Exim Bank president said. While the furniture and home-decoration sectors are suffering because of the housing bust, others, like the high-end jewellery segment, are doing fine, he said. However, foreign banks have tightened lending, particularly for purchases of jewellery, furniture and electronic products.

Ex-Im is waiting for an additional Bt5 billion in capital to expand its export credit insurance programme. The insurance covers credits tapped by exporters from 10 commercial banks. As a special consideration for small and medium-sized firms, Ex-Im Bank has also increased the insurance coverage from 85 to 90 per cent of the export credit amount.

As more Thai exporters - mostly in the jewellery and textile industries - realise the default risks, demand for insurance has grown considerably. The bank has extended Bt12 billion worth of such credits, beating its annualised target.

A delay in the Bt5-billion funding would reduce the bank's ability to extend export credits, Apichai said. However, the bank expects lower demand for credits amid sagging demand.

Based on a GDP growth forecast of 3 per cent and expected export growth of 7 to 10 per cent, the bank earlier planned to offer an additional Bt8 billion worth of export credits this year to boost the outstanding amount to Bt58 billion. The target would be revised downward soon, Apichai said.

As global trade shrinks, Ex-Im Bank has also seen a rise in demand for working capital from exporters who need funds to manage their inventories. This has prompted the bank to issue its first bill of exchange, to raise funds for short-term lending. The Bt1-billion, seven-month B/E will be available for subscription today, with an interest rate of 1.35-1.4 per cent per annum.

Ex-Im Bank also plans to ask the Finance Ministry to relax the reserve requirements for export credit insurance, which would enable it to help more exporters. The bank believes the requirement of 20 per cent of capital funds should be reduced to 15 per cent.

"As a state-owned bank, we just can't say no to any loan proposal. We realise that our risks are greater than those faced by commercial banks, but we also have a thorough risk-management scheme in place," Apichai said.

However, due to the export slump, Apichai admitted that the bank's non-performing loans are expected to rise this year from about 10 per cent of outstanding loans in the first half of 2008.

Still, the bank is forging ahead with its plans to help Thai exporters, including the opening of offices in India and Indonesia, following on the heels of the inauguration of the bank's Russian office in February.