Kasikornbank has introduced a three- to six-month grace period for principal repayments on new loans in a bid to boost liquidity for SME clients facing problems because their rice-farming customers are unable to pay them.
Rice farmers cannot meet many of their own commitments because they are still owed money under the government’s pledging programme.
The bank’s SME (small and medium-sized enterprise) advisory teams have, therefore, been deployed to assist SME customers at their place of business.
KBank executive vice president Patchara Samalapa yesterday said that farmers involved in the rice-pledging scheme were still suffering from a cash shortage, as they have not been paid by the government on time.
This has had repercussions for related SME businesses, including distributors of fertiliser, chemical products, grain and agricultural machinery, as well as machinery rental providers.
In April of each year, farmers take on fertiliser, grain, agricultural chemical products and machinery from SME operators and be given payment terms of between three and six months.
Last year, rice farmers were scheduled to repay these SME businesses by October – after they were paid for their pledged produce under the government’s programme.
However, due to the prolonged problems with the scheme, farmers now have insufficient cash to repay their debts, or even to buy agricultural products for plantation in the new season.
Consequently, related SME businesses have been affected by being unable to get their trade receivables paid, he explained.
Although the impact is not seen as very severe at present – as most SMEs have used their capital to repay KBank – some have showed signs of late repayment.
If the situation continues, they may lack working capital and eventually have fewer business transactions, and could even cease investment as they wait for the financial position of their rice-farmer clients to improve, he said.
Patchara added that KBank was of the view that the delayed payments to farmers under the rice-pledging programme would soon have an increased negative effect on these SME businesses.
The bank has, therefore, deployed teams to closely monitor the provision of assistance measures to SME customers, with a grace period for loan principal repayment of between three and six months available in order to maintain these businesses’ liquidity.
Moreover, new loans will be available for customers selling agricultural-production items, including distributors of fertiliser, chemical products, and agricultural machinery and equipment, as well as agricultural service providers.