Banks sweeten SME pot to buoy accounting scheme

The country’s five largest banks will offer a fixed interest rate of 5% for two years to small- and medium-sized enterprises (SMEs) that apply for the special loans in return for adopting a single financial account.

The lower-rate SME loans will be rolled out on Jan 1, 2019 — the same date as enforcement of the Bank of Thailand regulation that requires banks to give greater consideration to financial statements submitted to the Revenue Department when considering SME loans.

The special loans are aimed at encouraging SMEs to adopt a single financial account in compliance with government policy.

The top five lenders account for 80% of SME loans. The cheaper rates are aimed at drawing these businesses to implement the Revenue Department’s single financial account scheme, said Predee Daochai, chairman of the Thai Bankers’ Association.

The single financial account scheme is further intended to give SMEs better access to financing and reduce credit risks in the banking industry, he said.

Lenders now charge SME borrowers a 2% rate on top of the minimum retail rate (MRR). The MRR of the five biggest banks — Bangkok Bank, Siam Commercial Bank, Krungthai Bank, Kasikornbank and Bank of Ayudhya — is in a range of 7.12-7.37%.

Some 450,000 juristic SMEs registered for the Revenue Department’s single financial accounting programme in 2016 from a total of 600,000 such entities nationwide. The scheme was initiated to encourage SMEs to pay their actual tax burdens.

Thailand has an estimated 2.8 million individual and juristic SMEs.

SMEs with registered capital not exceeding 5 million baht and revenue not exceeding 30 million for 2015 benefited from tax perks in 2016-17.

“Banks will provide other benefits including fee waivers and knowledge to SMEs who apply for loans,” said Mr Predee.

“With greater transparency under the single accounting standard, banks’ credit risks on SME loans will fall. It will also cut down on risk management costs, eventually leading to lower rate charges for SMEs.”

Finance Minister Apisak Tantivorawong said SMEs who use more than one financial account to avoid tax payments could fail to secure bank loans, as lenders from next year on will be required to use financial statements submitted to the Revenue Department as the main document for loan applications.