SME access to commercial bank loans is constrained due to their general lack of credit history, collateral, and reliable financial statements. To tackle these limitations, the government has introduced various measures to ease SME access to funding. In addition, the government has launched capacity-building programmes to boost SMEs’ competitiveness.
For example, the Thai Credit Guarantee Corporation (TCG) was established to ease SMEs’ financial constraints by providing credit guarantees for viable small enterprises with inadequate collateral. In 2009, the TCG introduced the Portfolio Guarantee Scheme designed to stimulate bank loans to SMEs. Since then, there have been six Portfolio Guarantee Schemes as well as guarantee schemes for start-up SMEs and micro-entrepreneurs. The outstanding guarantee amount has increased over the years and totalled THB 353 billion at the end of 2017, guaranteeing 293 316 SMEs in TCG’s portfolio .
Another measure that has promoted SME access to finance is the Business Collateral Act B.E. 2558 (2015). Prior to the Act, lenders could create security interests over their borrowers’ property and movable assets to secure loans. However, borrowers had to physically deliver their pledged movable assets to the lender, which was operationally impractical for a number of reasons. The Act has allowed security interests to be created without the need to physically deliver assets and also expanded the types of collateral which SMEs can register and use to secure loans. Collaterals eligible to be registered as securities include receivables, inventory, and intellectual property. In conjunction, the Bank of Thailand has also revised several financial regulations. In particular, amendments have been made to regulations concerning asset classification, the provisioning of financial institutions, collateral appraisals, foreclosure procedures, credit guarantees and public auctions. All of these revisions have permitted more types of collateral to be used to secure loans and deducted from loan value prior to underwriting.
Various government agencies have also launched capacity-building programmes to boost SMEs’ competitiveness through skill development, product development, and market access. Initiatives have ranged from coaching programmes which enable knowledge transfers from capable enterprises and SMEs to local SMEs and international counterparts. In 2016, the Office of SME Promotion undertook 37 projects worth over THB 5 billion for promoting and supporting SMEs. As of March 2017, 23 projects had been completed, while 14 others were still ongoing. The results of the SMEs promotion activities in 2016 reflected the direction of SME promotion based on the Business Life Cycle. All projects were designed in response to the different needs of four groups (Startup Group, Strong and Regular Group, Turn-around Group, and Ecosystem Group), focusing on incentives aiming to develop and incubate start-ups, enhance productivity and innovation in SMEs, promote market access and internationalisation, and create a conducive legal ecosystem and infrastructure.
Furthermore, the SME One-Stop Service Center was established to gather SME data, provide free consultancy service regarding for example product development and financial management, and facilitate registration of SMEs. These initiatives are ongoing to provide continual knowledge and capital development to support SMEs.
There is also a government initiative to create a data ecosystem which allows data sharing and will be accessible to all stakeholders in order to support information-based activities including lending, this will offer more opportunities for SMEs to obtain credit.
