BoT,, BoT states that SMEs have difficulty accessing funding sources. It is a structural problem in Thailand. The guarantee mechanism has limitations. Suggestions for increasing efficiency Unlimited types of lenders - loan formats to gain access to more capital sources There is risk assessment information, flexibility, and a stable source of funding. The Bank of Thailand (BoT) organized a seminar on 'Credit Guarantee Mechanism, an aid for SMEs in accessing capital' to exchange views from stakeholders in various sectors and listen to opinions that will be beneficial to the development of Thailand's credit guarantee mechanism to help increase opportunities to access sources of capital. business capital, especially SMEs, with Mr. Ronadon Numnon, Deputy Governor for Financial Institution Stability, BoT, giving an opening speech, emphasizing the problems of SMEs that play an important role in driving the Thai economy: There are still limitations on access to funding sources. to the point of being unable to fully operate the business All relevant sectors should work together to find a way to develop a mechanism that will increase SMEs' access to capital and best meet the country's needs. Mr. Somchai Lertlapawasin, Assistant Governor, Financial Institutions Policy Department The BoT revealed the results of a study by the BoT on the problems of access to capital for SMEs and the role of the credit guarantee mechanism. It stated that access to capital for SMEs is an important structural problem in Thailand. SMEs business loans have continued to shrink from before COVID-19 to the present (as of the latest in the first quarter of 2024, SMEs business loans shrank 5.1%). In addition, from data from the Office of Small and Medium Enterprises Promotion (OSMEP) and The BoT found that out of a total of 3.2 million SMEs in the system, less than half of SMEs have access to business loans in the financial institution system. SMEs have difficulty accessing capital. from both having limited capital and being able to compete causing the operating results to fluctuate Having financial history information is insufficient and unwarranted. including value The loans are small. It is not worth the financial institution's costs to assess and monitor risk. This makes financial institutions overall cautious in granting loans. or provide loans with higher borrowing costs than large businesses to compensate for the risk In the past, guarantees by the Small Industry Credit Guarantee Corporation (TCG) were an important mechanism. that alleviates the risks of SMEs, making financial institutions Dare to grant credit more thoroughly TCG's Portfolio Guarantee Scheme (PGS), each project, including credit recovery guarantees during COVID-19, has helped SMEs business loans expand even during the crisis. However, the current guarantee mechanism still has Limitations such as -limited scope of guarantees It covers only loan guarantees issued by financial institutions. (Commercial Bank Specialized financial institutions finance company credit foncier companie s) and subsidiaries only -Insufficient information and tools This makes it difficult to assess the risk of each SMES. Therefore, a group guarantee method must be used (portfolio guarante) that charges the same fee from the debtor. every person in each project As a result, some debtors may have to pay fees higher than their own risk. -Guarantees lack flexibility to help support business sectors that are consistent with the country's direction/strategy. or as a mechanism to provide assistance to the business sector during times of crisis This can be seen during the COVID-19 period where an Emergency Decree (Royal Decree) had to be issued to provide low-interest loans (soft loans) to SMEs as additional assistance. Mr. Somchai also added that there is an effective credit guarantee mechanism. It should answer the needs of both the government, lenders and SMEs under appropriate incentives together. Examples of successful credit guarantee mechanisms in countries with SMEs as the core are similar to Thailand, such as South Korea, Malaysia, and Taiwan. They have 5 important characteristics: they are not limited to the type of lenders; Or the form of borrowing is only loans. This makes it possible to support access to funding sources for SMEs in a variety of formats that are more suitable for each business group, including supporting businesses according to the goals of driving the country's economy in the long term, with data and models to use to assess credit risk. that reflects the level of risk Each debtor Allows for risk-based pricing, flexibility Can be used as a mechanism/policy tool both in normal conditions and during times of crisis, with stable and stable funding (funding) coming from stakeholders in each sector. Like South Korea Contributions will come from both governments. financial institution and other voluntary business taxes, causing both the government and financial institutions and the private sector must work together to evaluate and grant loans responsibly. And lastly Providing support to SMEs beyon d just access to capital, such as financial advisors with complete services Both provide advice on business operations and money management to help raise the potential of SMEs. During the discussion between representatives from relevant sectors, including Mr. Saengchai Teerakulwanit, President of the Thai SME Confederation, Mr. Sitthikorn Direksuntorn, Director and General Manager of TCG, Mr. Chaiyot Tanpisut, Assistant Manager. big Kasikorn Bank, Mr. Somchai Jitsuchon, Research Director Comprehensive development Thailand Development Research Institute (TDRI) and seminar facilitator Dr. Nacha Ananchotikul Assistant Managing Director of KKP Research exchanged opinions on ways to develop a credit guarantee mechanism to better meet the needs of Thai SMEs. The BoT will take the comments and suggestions into consideration and discuss with relevant agencies. Especially the Ministry of Finance to jointly develop the country's credit guarantee mechanism that is more efficient, flexible and comprehensive. Source: T hai News Agency