Understanding the SMEs' Dilemma: Why Can't They Access the "Soft Loan" Measures or Low-Interest Loans from the Bank of Thailand, Despite These Measures Being Directly Aimed at Supporting SMEs, Especially During the COVID-19 Crisis

Soft Loans, or low-interest loans from the Bank of Thailand (BoT) through commercial banks, are one of the measures announced by the BoT to assist small and medium-sized enterprises (SMEs) since March of this year. However, as of July 13, commercial banks had only approved loans amounting to 103.75 billion baht for SMEs, which is just one-fifth of the total allocated funds, with only 63,342 SMEs receiving these low-interest loans.

This means that only about 520,000 SMEs, or 17% of all SMEs, are eligible to apply for soft loans, as these 520,000 SMEs already have existing loans with commercial banks. However, only 12% of this group has actually received soft loans.

Meanwhile, over 83% of SMEs, approximately 2,480,000 businesses, have never had access to commercial bank loans since before the COVID-19 outbreak, and thus have no eligibility for soft loans.

  • Why Can't SMEs Access Soft Loans?

According to a survey conducted by the SME Council on the assistance needs of Thai SMEs on March 25, during the COVID-19 pandemic, it was found that:

  • About 40.52% of SMEs with annual revenues between 1-10 million baht (approximately 2,730 to 27,300 baht per day) mostly employ 5-10 workers. This group primarily operates in the retail food and beverage services, consumer goods retail, and agricultural sectors that supply goods to retail and wholesale businesses, driving the business to the end consumer.

  • 18.08% of SMEs have annual revenues not exceeding 1 million baht (less than 2,730 baht per day), mostly employing 1-5 workers. This group mainly consists of retail businesses like convenience stores and noodle shops.

  • 29.74% of SMEs have annual revenues between 10-50 million baht, with most employing 10-25 workers.

  • 11.37% of SMEs have annual revenues exceeding 50 million baht, employing 25-250 workers.

However, many SMEs have complained about the accessibility of these low-interest loans, stating that they cannot access them because the loans are distributed through commercial banks, which prioritize their existing clients and assess their creditworthiness first. The BoT stipulates that SMEs that are not existing clients of financial institutions cannot apply for soft loans, as this is intended to expedite the assessment process and manage the risk of bad debts for financial institutions.

Small SMEs, earning between 2,730 and 27,300 baht a day, and those earning less than 2,730 baht a day, make up nearly 60% of all SMEs. This group is the most in need of access to credit but cannot access the BoT's soft loans due to the fear of non-performing loans (NPL) and the requirement to have a prior borrowing history.

Thus, around 2,480,000 SMEs that have never had or cannot access commercial bank loans since before COVID-19 have no rights to access soft loans and must turn to personal loans and informal lending instead!

In the next issue, we will discuss how retail platforms connect production sectors to consumers and assist SMEs.

SOURCE: www.bangkokbiznews.com