2012/SOM1/EC/WKSP/010rev1 Session 4 Thailand s SMEs Promotion on Credit Access Submitted by: Thailand APEC Ease of Doing Business 2012 Stocktake Workshop Moscow, Russia 12-13 February 2012
Thailand s SMEs Promotion On Credit Access APEC EoDB 2012 Stocktake Workshop 12 February 2012 - Moscow, the Russian Federation Promote, Support & Assist the SMEs Presentation Topics 1. Background Information on Thai SMEs 2. Financial Access for Thai SMEs: Self Assessment 3. EODB s Recommendations on Making It Easier for SMEs Getting Access to Finance in Thailand 4. Recent Policy Adjustments and Other Positive Signals 5. Access to Finance in Thailand s 3 rd Master Plan on SMEs 1
Profile of Thai SMEs 2010 LEs + Agriculture + etc. Number of Enterprises (2.9 Million Enterprises) Employment Creation (12.6 Million Position) (10,102,986 Million Baht) Export Value (6,1777,688 Million Baht) Number of Thai SMEs 2
Share of SMEs in GDP Export of Thai SMEs in 2010 3
Export of Thai SMEs to ASEAN +6 in 2010 Self Assessment Low level of Policy Coordination among concerned parties on SME Financing SMEs Financial Structure Tax Exemption MOF Lending Consultancy OSMEP MOI MOA MOC Equity Debt VCs MAI Commercial Banks 2010 : 2.7 Trillion Baht 941,548 SMEs SFIs (4) 2010 1.14 Trillion Baht 269,686 SMEs 4
Self Assessment Collateral is required for lending both by the SFIs and commercial banks. Following instructions from the Central Bank, SFIs operates on a profit-making principle instead of socio-economic development goals. The Central Bank makes no differentiations in lending policies of commercial banks and SFIs (example SME Bank lending during the flood situation). Shortage of fund is most prevalent for start-up firms and high risk, innovative enterprises. the government financed Venture Capital is not going anywhere. Commercial banks maintain that high cost and high risks are associated with SMEs lending. Working capital is calculated by commercial banks from sale turnover. After baht appreciation this affects the ability of SMEs to draw on working capital. Self Assessment Not all SES are included in the National Credit Bureau Database, whereas Micro Enterprises are totally excluded from the database. Financial Institutions personel lack analysis tools necessary to lend to innovation-driven industries (i.e. assessing intangible assets) Approval period of SFIs is longer than that of commercial banks Management guidance and consultancy services among various agencies are not coordinated. No portfolio approach to management guidance (start-up, growth, turnaround, internationalization) 5
Type of Enterprise All SMEs Exporters / Foreign Investers LEs Asset > 200 Mil. Baht Employ > 200 MEs Asset > 50-200 Mil. Baht Employ >50-200 SEs Asset < 50 Mil. Baht Employ < 50 Community Enterprises (< 7 Employees) Micro Enterprises Commercial Banks - Gap Saving Co-ops SBCG BAAC SME Bank Government Saving Bank GHB Exim Bank Commercial Banks - Gap A Review on Recommendations Making It Easier for SMEs Getting Access to Finance in Thailand A Study by Japanese Government 6
Japan s Recommendations Financial Policies Financial Institutions SMEs Recommendations On Financial policies 1. On Credit guarantee system Enhance credit guarantee system Allocate more credit guarantee to commercial banks that lend extensively to SMEs 2. On NPLs of manufacturing industry and OTOP Government should provide management guidance to companies 3. On Debt ratio D:E should be reduced based on financial institution guidance and support from OSMEP 4. Facilitate legal infrastructure 5. Facilitate credit information system 6. Provide business opportunities 7
Recommendations On Financial Institutions Reform entire industry s understanding by compiling successful case in which finance risk was lowered by combining management guidance and a diversified credit decision with actual financing Recommendations On SMEs 1. Educate SMEs owners at both the central and local levels with strong support from OSMEP or Chamber of Commerce 2. For SMEs involved in OTOP activities Continuously evaluate the repayment capacity of enterprises Classify enterprises based on risk associated with their repayment capacity Strengthen management infrastructure for SMEs 8
Thailand s Policy Adjustments in SME Financing : Positive Signals Commercial Banks new active players in SMEs lending such as Siam Commercial Bank, Thai Military Bank, Islamic Bank, and CIMB. SME Bank Add 5,000 SMEs to broaden its customer base including those SMEs in strategic sectors such as tourism, logistics, food, alternative energy, creative economy, SMEs in industrial estates Increase its role both in pre and post lending training and consultancy for SMEs customers to reduce perceived risk association to SMEs lending. Accelerate loan approval period Minister of Finance and OSMEP - Survey on demand and supply for SMEs Demand for Finance Start ups Working Capital Growth Supply for Finance Family & Friends Commercial Banks GAP No Access to Capital Information source of lending 9
Other measures Credit Risk Database (SBCG) Drafting Standard Accounting System for SMEs (Accountants Council) MOF is now encouraging the Bank of Agriculture and Cooperation to link its customer base to National Credit Bureau so that it can be accessed by other commercial banks Bankable Business plan training (SFIs) MOF is encouraging SBCG to explore portfolio guarantee for start-up loans EXIM Bank -Introduce 3-day approval period -Upgrade Import-Export related database as public goods for SMEs SBCG in 2011 introduced new measures such as: Portfolio Guarantee Scheme phase III Guarantee Packing Credit Guarantee working capital credit for SME Exporters Risk loans pricing 10
Management Guidances and Consultancy Services OSMEP : working with industries associations and universities to implement Annual Action Plans for SMEs Promotion focus on business start-up, clustering and networking, preparing SMEs for AEC. - 60 clusters and SMEs networks per year - 250,000 start ups in 5 years; 20,000 start up funds for 2012 - in depth training of 6,000 SMEs per year DIP : Incubating manufacturing SMEs DAP : Incubating SMEs in Agricultural sectors DBD : SME exporters, logistics, services sectors, franchising DCD : Community Enterprises and OTOP BOI : SMEs in industrial estates Chamber of Commerces??? : Network of SME Promotion in regional and local areas Thailand s Master Plan on SMEs Promotion : Strategy 1.4 Improving SMEs Access to Finance (2012 2016) Strategic Action Strengthening systems and capaicity buildong for SMEs so that they may have access to finance and be able to enhance the efficiency of their financial management. 11
Thailand s 3 rd Master Plan on SMEs Promotion (2012 2012 2016 2016) 2 3 Building and strengthening Promoting a environment for Thai SMEs balanced growth competitiveness for regional Thai SMEs 1 Developing enabling factors and conductive business environment for Thai SMEs Database 4 Building and strengthening the business capability of Thai SMEs for international economic integration KM Regulations Capital CSR HR IPs Technology & Innovation Marketing Risk Management 6 Strategic Actions 1. Capacity building for SME business operators Increase KM among SMEs Writing bankable business plans training Systematic accounting system Provide information on financial products, risk management and credit guarantees 2. Promote the role and involvement of financial institutions in the development of SMEs Special Financial Institutions (SFIs) Provide advice and knowledge Build up credit history database Organize marketing promotion activities 12
Strategic Action 3. Promote linkages of financial services and SME promotion projects among different agencies Special financing terms and supports for SMEs working with University Incubators and participating in Government s capacity building programs. Diagnosis services for SMEs in order for them to be able to receive funding for starting/ improving/ developing businesses 4. Diversify and deepen financial products for SMEs Money market Capital market Other financial sources Venture capital Start-up fund Seed fund leasing and factoring Plan on Credit Strategic Access Action for SMEs 5. Set guidelines and improve credit guarantee system for SMEs Increase new forms of guarantee Intangible and movable assets Intellectual property Brand Inventory Explore non collateral loan options Expand the role of institutions and forms of credit guarantee 6. Promote a centralized database system for increased efficiency in accessing financial sources Push for financial sources to utilize the information from the central database in their consideration of applications SMEs credit Rating database Demand and amount loans provision to SMEs database 13
Lending to SMEs Compared to Les (Compiled by Bank of Thailand) Amount (Baht) SMEs No. of SMEs Amount (Baht) LEs No. of LEs 2005 2.4 Trillion. 924,315 2.0 Trillion. 22,399 2010 2.8 Trillion. 957,772 3.6 Trillion. 85,554 SFIs Approved Loan No. of SMEs SFIs 1999 2009 2010 Total (1999-2010) SME Bank 141 8,789 38,530 98,187 Exim Bank 352 333 456 5,584 Government Saving Bank 2,211 5,693 4,424 847,456 Bank of Agriculture and Cooperative 3,633 199,590 226,495 1,431,432 SBCG 29 5,763 13,346 36,113 14
Thank you Dr. Wimonkan Kosumas Deputy Director General The Office of SMEs Promotion TST Tower, Fl 18 21 Vibhavadi-Rangsit Rd Jatujak, Bangkok 10900 Thailand Tel. 66 2298 3013 Fax. 66 2273 8850 wimokan@sme.go.th www.sme.go.th 15