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SMEs need grace period on loans

THE TREND of small-to-medium-sized enterprises seeking a delay in repaying their loans is expected to build momentum, according to Kasikornbank, the country's biggest SME lender. In the first three months, SMEs asked for a grace period on loans worth Bt9 billion because the slowdown in orders had cut their cashflow, Patchara Samalapa, executive vice president of KBank, said yesterday.

The bank offers a grace period of six months on principal.

SMEs in the hotel, real estate, agricultural-related and furniture businesses were among those asking for a grace period.

Both SMEs that have been granted a grace period and those that are not asking for one are expected to need a grace period because the bank is aware that buyer sentiment has not recovered yet.

In practice, SMEs have enough liquidity to do business but the lack of a rebound in purchasing power has affected their inventories, so they request a grace period until they can move their stocks.

During the period of lower purchasing power, most SMEs have made huge debt repayments rather than borrow new loans.

In the first three months, the SME divisions' new loans rose 11 per cent year on year to Bt65 billion, while outstanding loans stood at Bt530 billion. Fee income grew by 15 per cent and total income by 16 per cent to Bt9.6 billion.

The bank targets SME loan growth of 6 per cent this year. Drawdowns are expected to be seen in the second half driven by agribusinesses, which need more funds to buy crops from farmers.

The bank has to take care of its existing customers more, rather than trying to acquire new customers because amid the current, challenging situation, reaching an understanding with old customers is easier.

However, the bank last month welcomed new customers who were uncomfortable with the stricter conditions of other banks.

"New customers are medium-sized enterprises. We know that these customers are low risk because their size has prepared them to make transactions with financial institutions," he said.

KBank is expanding in the Northeast because it has fewer branches over there than Krungthai Bank and Siam Commercial Bank.

Most SME customers are in the provinces and the branch expansion in the Northeast will support financial transactions to existing customers and make it more convenient for them to use KBank's services than use accounts with other banks, he added.


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