Analyzing Business Loan Data from the National Credit Bureau (NCB): How Concerning is Business Debt? (Kasikorn Research Center)

The Kasikorn Research Center has analyzed business loan data from the corporate debtor account database, which is an anonymous statistical database of National Credit Bureau Co., Ltd. (NCB). The average number of accounts is 1.7-1.8 million accounts per quarter. With data up to the second quarter of 2024, five key issues have been identified:

1. The quality of Thai business debt has deteriorated since late 2023 after the financial assistance measures during COVID-19 came to an end.
2. Smaller businesses are facing more severe bad debt issues.
3. Financial institutions of all types are increasingly facing clear impacts.
4. When delving into chronic issues, the severity of problems is greater than the overall business loan portfolio, and the debt issues of small and medium enterprises are becoming more concerning.
5. Business sectors facing debt quality issues include real estate, accommodation and food services, wholesale and retail trade, and manufacturing, reflecting immediate challenges and structural problems that require collaboration across all sectors to resolve.

1. The quality of Thai business debt has deteriorated since late 2023 after the financial assistance measures ended.

Overall, the quality of debt for Thai businesses according to NCB data[1] shows that while there was an improvement in debt quality after the COVID-19 crisis, the proportion of overdue debt (1 day or more) decreased from a peak of 7.18% in the first quarter of 2020 to around 4.60-4.70% during 2023, thanks to various relief measures implemented during COVID. However, this proportion began to rise again in early 2024, reaching 5.02% by the end of the second quarter of 2024, as the effects of the measures waned and the economic recovery remained fragile and uneven (Figure 1).

2. Smaller businesses are facing more severe bad debt issues.

When examining the proportion of non-performing loans (NPLs) by business size[2], it is found that overdue debt (1-30 days) and NPLs (overdue for more than 90 days) are most prevalent in Super Micro, Micro, Small, and Medium businesses. This reflects the increasing sensitivity of smaller businesses to environmental factors (Figure 2).

3. All types of financial institutions are facing clearer impacts.

When focusing on debt that has just surpassed the payment deadline of 30 days for Super Micro, Micro, and Small businesses, which are the most severely affected groups, it indicates that all lending institutions (members of NCB) are experiencing a rise in low-quality debt (not limited to commercial banks and specialized financial institutions). This is particularly true for leasing companies and consumer finance, followed by credit card companies, with overdue debt (1-30 days) increasing to 5.04%, 4.27%, and 3.44%, respectively (Figure 3).

4. Focusing on chronic issues reveals problems more severe than the overall portfolio, with small and medium businesses becoming increasingly concerning.

To accurately assess the causes and trends of debt quality in the business sector, the Kasikorn Research Center filtered business loan accounts with historical data for three years (excluding newly established businesses and those that disappeared for various reasons), resulting in a sample of approximately 650,000 accounts. This study found that the proportion of overdue debt at all stages for this group of loans is around 9.47% in the second quarter of 2024, a significant increase from 5.50% in the second quarter of 2022, primarily due to the rise in NPLs (Figure 4).

The proportion of debt that has just started to become overdue is significantly higher than the overall business loan portfolio, which stands at 5.02%, emphasizing that this group of debtors has not benefited from the recovery of economic activities and/or the government's and financial institutions' debt relief measures as much as they should have. Furthermore, when categorized by business size, it is evident that Medium and Small businesses are experiencing a more pronounced decline in debt quality compared to the overall portfolio (Figure 5), indicating that issues are spreading from micro businesses to small and medium enterprises.

5. Business types with concentrated problems include construction, real estate, accommodation and food services, wholesale and retail trade, and manufacturing, reflecting immediate challenges and structural issues.

When examining the dimensions of SME business types with chronic debt, it is found that overdue debt (1-30 days) is concentrated in real estate and construction, accommodation and food services, wholesale and retail trade, and manufacturing (which together account for 75.8% of total SME loans). This reflects immediate challenges such as weak purchasing power and increased competition from cheaper foreign goods, which pressure sales and orders, exacerbating the ability to repay debts (Figure 6). Additionally, it is noteworthy that the accommodation and food services sector has begun to worsen in the first half of 2024, coinciding with the uneven recovery of tourism, which also affects the accommodation and restaurant sectors.

As for the structural problems leading to the continuous rise in NPLs (overdue for more than 90 days) in the aforementioned core businesses, they are largely due to household debt issues that pressure purchasing power, rising costs, competition with foreign capital, changing consumer behaviors, trade wars affecting supply chain adjustments, and increased trade regulations. These factors inevitably lead to an influx of cheap foreign goods into the Thai market (e.g., electronics, textiles, and electrical appliances after exports to the U.S. have decreased), forcing the manufacturing sector to reduce production capacity for many products. Thus, all these factors are putting pressure on the income and competitiveness of Thai SMEs, making it increasingly difficult for them to survive in a rapidly changing global trade environment.