Government loan guarantees help SMEs access better funding

Thailand’s central bank has provided 500 billion baht in soft loans for financial institutions to re-lend to SMEs.
By: | December 24, 2020

Loan guarantees by the government are crucial in allowing SMEs to have better access to funding sources amid heightened risks caused by the impact of COVID-19, said the Bank of Thailand. 

Although commercial banks have not withdrawn loans at a significant level from the central bank’s 500 billion baht (US$16.58 billion) soft loan scheme, there are other channels facilitating SMEs’ access to funding sources like the loan guarantee programme of the Thai Credit Guarantee Corporation (TCG), said Bank of Thailand governor Sethaput Suthiwartnarueput, according to the Bangkok Post.

“Given the higher risk profile of SMEs, these businesses face difficulty in accessing loans. Loan guarantees as a part of any scheme is a solution,” he said.

In August, TCG approved 57 billion baht (US$1.89 billion) worth of loan guarantees for SMEs qualified under the Bank of Thailand’s soft loan scheme.

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However, the businesses have yet to receive the soft loans because of financial institutions’ discretion over concerns associated with non-performing loans, said TCG president Rak Vorrakitpokatorn.

Thailand’s central bank has provided 500 billion baht in soft loans at 0.01% interest to financial institutions for two years to re-lend to SMEs, at a 2% interest and with a maximum credit line of 500 million baht (US$16.58 million). For this financing, the government will also absorb interest charges to the SMEs for six months.