Thai Credit Guarantee Corporation (TCG), a state-owned specialised financial institution, is capitalising on digital technology and new strategies to help more small and medium-sized enterprises (SMEs) access loans from financial institutions.
New TCG president Sittikorn Direksoonthorn said his goal is to increase the number of SMEs that can access loans from financial institutions this year to at least 40% of total SMEs in Thailand, which are estimated to number 3 million.
He said only around 20% of all SMEs can access such loans now.
Mr Sittikorn said TCG adjusted its strategy to meet this target. The company is planning a more proactive approach, instead of waiting for financial institutions to send their customers to request TCG's credit guarantee.
He said without this shift in strategy, the number of SMEs accessing loans would remain at the same low level.
SMEs, especially micro-SMEs or very small merchants, need funds to support their businesses, which are suffering from the impact of the pandemic and the Russia-Ukraine war.
THREE NEW ENGINES
"TCG is using three new engines to drive the organisation's goal," said Mr Sittikorn.
The first engine is called "design product by segment". Under the concept, TCG will work with banks to design credit guarantee products that fit demand from SMEs, he said.
For example, TCG may work with banks to develop credit guarantee for SMEs that are members of the Federation of Thai Industries or Thai Board of Trade. Most of these SMEs are suppliers of major companies.
Mr Sittikorn said TCG already proposed this idea to the Board of Trade, which has around 10,000 SME members.
The second engine is called "new culture". TCG is promoting a new corporate culture in line with its adoption of digital technology.
The company wants work more quickly, similar to a fintech company, with the mindset to help weak SMEs survive economic uncertainties, he said.
Mr Sittikorn said if TCG uses the general criteria of a financial institution in considering the extension of credit guarantees to SMEs, most of them are unlikely to qualify for loans amid a weak economy. This means only the same small subset of SMEs that have strong financial health would be able to access loans, he said.
In the past, some SMEs failed to secure bank loans because they did not know how to prepare business accounts, had poor credit records or racked up a mountain of debt.
The third engine is called "new business model", referring to TCG's connection with the country's key digital infrastructure. This infrastructure includes the national digital ID platform, the interbank transaction management and exchange system, as well as a data linkage with the Department of Business Development.
All these connections should enable TCG to serve SMEs quicker via the digital mode, said Mr Sittikorn.
He said TCG also plans to create data linkages with financial institutions to promote seamless coordination with lenders and reduce paperwork.
These connections should reduce TCG's overall costs and enable it to provide services on a nearly real-time basis, said Mr Sittikorn.
The company wants to link with major e-marketplaces as they play a crucial role in the modern trade world, he said.
SERVING MICRO-SMES
TCG has been essential to SMEs during the pandemic, said Mr Sittikorn.
He said many Bangkok enterprises shuttered after the pandemic hit the Thai economy. Employees at these enterprises returned to their hometowns and some became micro-entrepreneurs.
TCG is needed to extend support to these micro-entrepreneurs in order for them to access loans to run their businesses, said Mr Sittikorn.
He said during 2020-21 all SMEs suffered from the impact of the pandemic, but micro-enterprises suffered the hardest blow.
In terms of a ratio, out of every 100 companies on TCG's non-performing guarantee (NPG) list, 70 were micro-enterprises. However, these NPG micro-enterprises account for only 15-18% of its total NPG amount, given their low loan level of around 120,000 baht per enterprise.
Mr Sittikorn said helping micro-SMEs gain access to loans means they can avoid loan sharks, which charge a very high annual interest rate.
Some loan sharks charge an interest rate as high as 36% per year.
He said the SME sector is one key pillar of the country's economy as it accounts for 70% of total employment in Thailand and generates 40% of the country's GDP.
In addition to extending credit guarantees, TCG also provides financial advice to SMEs, said Mr Sittikorn.
He said this year TCG set its credit guarantee target at 120 billion baht.
The company's NPGs at the end of last year tallied 9% of total credit guarantees outstanding, down from 11% in 2020 and 15% in 2019.
