SMEs seek working capital as political crisis hits cash flow
February 10, 2014 00:00
By SUCHEERA PINIJPARAKARN
SMALL and medium-sized enterprises (SMEs) are in need of more working-capital loans from banks, as the impacts of the country's political crisis have seen a tightening of their cash flows, along with those of their trading partners.
Prasit Wasupath, senior executive vice president of Krungthai Bank, said SMEs are in need of working capital, rather than term loans. They have suffered a tightening of their cash flow due to delays in payments for products and services by trading partners whose operations have been affected by the troubled political situation in the country.
Early last week the Bank of Thailand urged commercial banks to support the liquidity of SME customers, given the risks they currently face, by reducing interest rates or extending payment-due dates.
Sayam Prasitsirikul, head of SME banking at Bank of Ayudhya (BAY), said the impacts of the political unrest on the SMEs should be seen clearly in the second quarter. Some SMEs had already missed debt-repayment dates due to the economic slowdown in the fourth quarter last year.
The SMEs also have lower demand for long-term loans following their suspension of new-project launches and business-expansion plans due to the ongoing political uncertainty.
BAY is also more cautious about providing loans at this time of political uncertainty, particularly to small businesses, which carry higher risk than loans to medium-sized and corporate businesses.
In practice, BAY limits the credit line for a small business to Bt12 million.
BAY has also shifted its focus from small businesses to medium-sized companies, especially those in the supply chains of Japanese companies.
Hotels want debt extensions
“We are talking with Bank of Tokyo-Mitsubishi UFJ (BTMU) to recommend to us Japanese companies with larger supply chains in order to design packages to tap supply-chain customers,” he said. The focus on the supply-chain segment can help it to maintain a loan-growth target of 13 per cent with an outstanding loan target of Bt206 billion at the end of this year, Sayam added. BTMU is BAY’s major shareholder.
He added that some medium-sized enterprises, especially hotels in Bangkok, have asked the bank to extend their debt-repayment periods, while some sought working capital to improve their liquidity.
At present, some hotels in Bangkok have occupancy rates of 20-30 per cent, a sharp plunge from 70 per cent in normal times, he added.
Jiratchyuth Amyongka, head of the commercial banking group at CIMB Thai Bank, said that due to the drop in demand for loans by SMEs and the high risk from the political uncertainty, CIMB group in Malaysia told its Thai unit to focus on fee income during the first half this year instead of loans.
It also revised downward its loan-growth target this year to 19 per cent from 22-23 per cent. Lending growth this year will be driven by small upcountry businesses with credit lines of no more than Bt20 million per customer.