SME Bank focused on working capital
The state-owned Small and Medium Enterprise Development Bank of Thailand (SME Bank) plans to focus more on working capital loan products to keep pace with growing demand, its chief says.
Most of the bank’s products are longterm ones, while working capital loans remain minimal, said president Mongkol Leelatham.
SME Bank has lent around 10 billion baht worth of factoring loans, considered working capital loans, he said.
SMEs demand working capital loans to increase financial liquidity, so the bank will concentrate more on this type of loan, said Mr Mongkol.
To extend more working capital loans, the bank needs to upgrade its risk management system with a core banking system, he said, an investment estimated at 600 million baht.
Siam Commercial Bank recently said it has become more prudent and started to closely monitor SMEs’ working capital loan usage after finding most SME borrowers are misusing loans, which could lead to a liquidity squeeze and defaults in the future.
The bank has cut the working capital or overdraft line of credit for SMEs that have repeatedly misused loans for alternative purposes in an effort to steer them towards financial discipline.
Mr Mongkol said SMEs are facing a double whammy with an interest rate hike likely next year and an intensified US-China trade conflicts.
To help alleviate impacts, SME Bank will maintain interest rates as long as possible, he said.
Economists forecast the Bank of Thailand will raise the policy rate for the first time in seven years in December or early next year with a quarter percent point hike to build up policy space for unexpected shocks in the future.
He said micro-SMEs are the bank’s focus as their ability to adapt to the changing business landscape remains slow.
The bank plans to offer as much as 90% of 35 billion baht in new loans next year to micro-SMEs.
Based on SME Bank’s ceiling for microSMEs of 600,000 baht each, the bank expects to offer loans to 50,000 operators.