July 29, 2014 00:00 By Sucheera Pinijparakarn The Na
Scheme to give businesses lacking collateral access to funds
The Thai Credit Guarantee Corporation (TCG) is set to guarantee loans for very small businesses and Otop (One Tambon One Product) enterprises so they can access funding from the banking system and don’t have to turn to loan sharks.
Most businesses in these categories don’t have the collateral banks require, and as a result, have to borrow from the non-financial system.
TCG yesterday signed memoranda of understanding with 19 financial institutions for Bt10 billion worth of credit guarantees for Otop enterprises and Bt5 billion for micro-enterprises.
Under the scheme, a participating Otop business can ask for a credit line from a bank of up to Bt3 million for a tenor of seven years, while a micro-enterprise can request a credit line from Bt10,000 to Bt200,000 for a tenor of 10 years.
TCG will waive fees for the first year for all enterprises under the programme.
Participating borrowers are not allowed to use the loans for refinancing, as the TCG wants to support cash flows and expansion of these businesses.
At present, there are more than 36,000 Otop enterprises and 72,000 registered community enterprises, and if they can access bank loans, it would given them a better chance to grow stronger, said Wanlop Tejapaiboon, president of TCG.
Jirachayuth Amyongka, senior executive vice president of CIMB Thai Bank, which is among the 19 banks joining the programme, said the scheme was a good start because businesses in these two segments were regarded as high-risk for banks as they lack collateral.
Banks can help educate Otop operators in terms of management and marketing if they are qualified by the TCG, he said.
CIMB Thai will adapt its existing loan products to chase Otop customers as it hopes that its SME (small and medium-sized enterprises) loan portfolio under the TCG guarantee will be Bt1 billion.
Pikun Srimahunt, first executive vice president of Siam Commercial Bank, said it hoped to provide loans totalling Bt1 billion under this programme.
Tanyapong Thamavaranukupt, adviser to the president of Krungthai Bank, said it had its own microfinancing scheme, and having TCG loan guarantees would reduce risk for this customer segment. KTB will adapt its microfinance project to comply with the TCG scheme.
KTB is improving its microfinance project, especially debt collection.
“We have outsourced microfinance debt collection,” he said.
Saijai Chaisikarin, manager of Ch-Sikarin Ltd Part, an Otop enterprise in Lampang province, said her company would apply for the TCG scheme as it wants capital to improve its manufacturing process.
She said she had to use collateral from her father to access loans but this necessitated a lot of paperwork, which is troublesome for an Otop business.