SME Bank approvals dip by 50%

The Small and Medium Enterprise Development Bank of Thailand (SME Bank) saw its new loan approvals in the first quarter fall 50% short of the target due to concerns of SME operators over the political impasse, says acting president Parichat Laothirasiriwong.

She said in the first quarter, SME Bank recorded new lending of only 2.5 billion baht, half the target of 5 billion as business operators delayed their investments and the bank tightened its lending in light of these uncertainties.

Ms Parichat said under the circumstances, the bank may be unable to reach its new lending target of 27 billion baht as the economy has been severely affected by the political turmoil, which has trimmed purchasing power as well as consumer confidence.

“We expect 20 billion baht in new loans is the best-case scenario we can hope for this year. We will take some time to observe the situation in the second quarter and see whether there is any improvement before deciding to cut the target,” she said.

Ms Parichat said if the target is cut to 20 billion baht, the bank’s outstanding loans by the end of this year would be around 95 billion baht, some 5 billion short of the previous projection.

However, the bank has attempted to increase new lending growth by signing up for the Industry Ministry’s SME competitiveness improvement scheme, which maintains a goal of gaining new lending worth 8 billion baht.

Under the programme, the bank will approve loans by focusing on loan applicants’ potential to make a profit, their ability to pay debt, the operators’ determination and other assets such as intellectual property, rather than considering only their collateral as is usually the case.

The Thai Credit Guarantee Corporation also joined the programme by helping to provide guarantees to loan applicants if they appear to have inadequate collateral for borrowing.

Concerning the progress of the SME Bank’s debt rehabilitation, the bank is still working hard to reduce non-performing loans (NPLs) to 25 billion baht by the end of this year from 32 billion at the end of last year.

Under the plan, around 2 billion baht in NPLs will be written off and another 3 billion in debt sold to Sukhumvit Asset Management, while the rest will be directed to a debt restructuring process.

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