Loan guarantees for small and medium-sized enterprise (SMEs) are expected to surge 67% to 10 billion baht a month in the wake of the new credit guarantee portfolio scheme by the state-owned Credit Guarantee Corporation (TGC).
The government's new economic stimulus package to help SMEs, which includes the TCG scheme, are attractive enough to push banks to extend them loans, said Boontuck Wungcharoen, chairman of the Thai Bankers' Association.
Some 6 billion baht a month in credit guarantees for SME loans is already granted under the TCG's traditional credit guarantee portfolio scheme.
Under the new stimulus, 100 billion baht in credit guarantees will be offered for NPL coverage of up to 22.5% of the portfolio.
It will provide full NPL coverage for up to 15% of the portfolio and half coverage for 15-30% of the portfolio, with banks taking responsibility for the rest.
The new credit guarantees will run through next June.
In comparison, the TCG now provides full coverage for NPLs in up to 18% of SME loans under its traditional portfolio guarantee scheme.
Most SME operators are facing a cash crunch from falling revenue cramped by weak purchasing power and the economic doldrums, while banks are reluctant to grant them fresh loans.
The government's new stimulus measures are aimed at affording SMEs better access to new funding.
Mr Boontuck, who is also chief executive of TMB Bank, said the new credit guarantee scheme would encourage banks to ease some loan approval conditions, thus improving SMEs' liquidity.
Local SME operators number 2.7 million, but only 700,000 have access to bank financing.
He said the 100-billion-baht soft loan scheme would also help to support SMEs' liquidity, but only for SME customers of state-owned banks rather than borrowers at commercial banks, as the latter typically have higher risk profiles.
For SMEs that are commercial bank customers, interest rates are not a major factor in obtaining loans, because each change of one percentage point in the interest rate represents only 0.2% of their total expenses on average, Mr Boontuck said, adding that accessing the loans were the most important factor.
Under the new stimulus package, the Government Savings Bank will lend to commercial banks at 0.1%, while the latter will relend to SMEs at no more than 4% interest for seven years.
Mr Boontuck said the soft loans and credit guarantees would not boost loan growth much this year since the scheme would start only in the fourth quarter.