Friday, June 19, 2009

Thai credit-guarantee scheme boosts loans

The Bank of Thailand is optimistic that commercial banks will achieve loan growth of 6 per cent this year, thanks partly to the government's credit-guarantee scheme.

Assistant Governor Sorasit Soontornkes yesterday said the expected growth was quite impressive considering the economy was shrinking, but it was still much lower than the double-digit growth achieved in the past.

Over the first four months of the year, total lending in the banking system grew by about 5.8 per cent year on year.

Full-year growth of 6 per cent would bring outstanding loans in the system to Bt350 billion, of which 40 per cent would be credit for small and medium-sized enterprises (SMEs).

"I think loan growth could reach 6 per cent this year, as it is not too high a target," Sorasit said.

Sorasit said the banks could revise their overall target upwards if the economy picked up later in the year.

Banks have so far given to the central bank the names of 150-160 debtors that will join the government's one-year credit-guarantee scheme. This accounts for Bt28.7 billion of the Bt30-billion scheme.

Bangkok Bank, Krung Thai Bank and Siam Commercial Bank will add more debtors to the list, in order to bring it up to the maximum level, he said.

Malinee Wangvongcharoen, vice president for marketing and business at the Small Business Credit Guarantee Corp (SBCG), said the state-run company had provided credit guarantees of Bt650 billion over the years. It expects to accelerate the pace of cover over the next year.

The scheme will likely give financial assistance to about 3,000 companies and help keep 6,000 SME workers in employment and create 800 new SME jobs, she said.

The SBCG says the Bt30-billion government scheme, which assists both existing and new customers, is clearly better than the assistance offered under the SBCG's normal conditions.

Requirement relaxed

It is not only collateral-backed debtors that benefit under the scheme, as non-collateral debtors and those with non-performing loans (NPLs) can also obtain credit guarantees.

The SBCG has relaxed its minimum collateral requirement from 50 per cent of the loan value to 30 per cent for SMEs who seek a credit guarantee, thus enabling debtors to benefit from a higher guarantee for the same amount of collateral.

The state-run credit guarantor has also reduced the credit-guarantee ceiling from Bt40 million to Bt20 million per bank per SME, because it plans to help a greater number of SMEs, said Malinee.

However, companies can maintain the same level of guarantee if they seek loans from more than one bank. Moreover, a very small company might need a guarantee of only Bt3 million to Bt4 million, well below the limit of Bt20 million per bank.

Under the government's scheme, the banks will also receive higher guarantees for possible losses from NPLs, and with immediate compensation.

The SBCG insists it continues to adopt careful credit analysis on a case-by-case basis as under the original scheme and not on a portfolio basis. Customers are, however, classified by a bank and subclassified by their quality.

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