Guarantee on loans to be raised to 50%

Economy May 23, 2014 00:00

By The Nation

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The Ministry of Finance plans to increase the loan guarantee for small and medium-sized enterprises to 50 per cent from 18 per cent currently as a way to entice commercial banks to lend to them and bolster their liquidity.

The ministry’s permanent secretary Rungson Sriworasat said that after discussions with the Thai Bankers’ Association (TBA) and the Thai Credit Guarantee Corporation (TCG), all agreed that the latter would be the key mechanism to ensure SMEs’ quick and efficient access to capital.

Next week, the ministry will hold talks with foreign financial institutions to ask them to support an additional 32 percentage points of the SME loan guarantees overseen by the TCG.

As an additional urgent measure, the TCG plans to postpone for six months the 1.75-per-cent fee it charges for loan guarantees. This proposal will be forwarded to the TCG board for approval next Tuesday, and is expected to come into effect on June 1 for 50,067 SMEs.

Another measure is to offer loan guarantees for five years, up from one year normally.

TBA chairman Boontuck Wungcharoen said foreign financial firms would be allowed to extend loan guarantees for commercial banks to mitigate their credit risks and reduce their reluctance to lend to SMEs during the current economic slowdown.

"This will help SMEs that face liquidity problems, particularly regarding credit terms with their trade partners," said Boontuck, who is also chief executive officer of TMB Bank.