copy the linklink copied!46. Thailand

copy the linklink copied!Key facts on SME financing

In 2016, there were approximately 3.01 million SMEs in Thailand, which constituted 99.7% of all enterprises. They altogether contributed to 42.2% of the country's GDP and accounted for 78.5% of total private sector employment.

According to the criteria defined by the Ministry of Industry, SMEs are categorized by the number of employees and the value of total fixed assets (excluding land).

SMEs are able to access financing through commercial bank loans. In 2017, outstanding SME loans totaled THB 4 220 624 billion, representing 50.47% of all outstanding business loans. Furthermore, SMEs are able to source funds from other financial institutions, the capital market, crowdfunding and venture capital.

Some SMEs still face problems including collateral constraints and a lack of credit history, which limit their access to bank loans. Government policies have been put into place to address these constraints.

For example, the Thai Credit Guarantee Corporation (TCG) provides credit guarantees for viable SMEs to ensure that SMEs with insufficient collateral have access to bank loans.

Moreover, The Business Collateral Act B.E. 2558 (2015) simplified the process of security interest creation and expanded the types of collateral which SMEs can register and use to secure loans.

In addition, to boost SMEs’ financial access in a sustainable manner, the government has also launched capacity-building programmes to enhance SMEs’ competitiveness.

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Table 46.1. Scoreboard for Thailand

Indicator

Unit

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Outstanding business loans, SMEs

THB billion

2 365

2 410

2 222

2 376

2 743

3 084

3 513

3 710

3 918

3 989

4 220

Outstanding business loans, total

THB billion

4 629

5 117

4 863

5 298

6 080

6 723

7 473

7 774

8 017

8 066

8 362

Share of SME outstanding loans

% of total outstanding business loans

51.06

47.09

45.70

44.85

45.11

45.87

47.00

47.73

48.87

49.45

50.47

Government loan guarantee, SMEs

THB billion

..

..

..

73

113

180

244

270

309

331

353

Non-performing loans, total

% of all business loans

8.23

5.77

5.32

3.96

2.97

2.36

2.13

2.07

2.55

2.88

3.01

Non-performing loans, SMEs

% of all SME loans

..

..

7.11

5.38

3.97

3.46

3.29

3.11

3.5

4.35

4.37

Source: Bank of Thailand and Thai Credit Guarantee Corporation (Outstanding loans and non-performing loans include only Thai commercial banks, excluding specialized financial institutions).

copy the linklink copied!SMEs in the national economy

There were approximately 3.01 million SMEs in Thailand in 2016, which altogether constituted 99.7% of all enterprises (see Table 46.2).

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Table 46.2. Distribution of firms in Thailand, 2016
By firm size

Enterprise size (employees)

Number

%

All Enterprises

3 013 722

100

SMEs

3 004 679

99.7

Small Enterprises (up to 50)

2 989 378

99.2

Medium (50-200)

12 928

0.4

Large (200 up)

9 025

0.3

Source: Thai Office of SMEs Promotion.

Over 41.7% of Thai SMEs are in the wholesale and retail sectors, followed by 39.6% in services, 17.3% in manufacturing, and 1.4% in agriculture (see Table 46.3). SMEs in Thailand accounted for 78.5% of all private sector employment (11.75 million people).

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Table 46.3. Distribution of firms in Thailand by sector, 2016
By sector

Sector

Number of SMEs

%

Wholesale and Retail

1 251 963

41.7

Service

1 189 373

39.6

Manufacturing

521 041

17.3

Agriculture

42 266

1.4

Source: Thai Office of SMEs Promotion.

According to a Ministerial regulation issued by the Ministry of Industry in 2002, the definition and classification of SMEs is based on the value of companies’ fixed assets (excluding land) and number of employees (See Table 46.4)

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Table 46.4. Definition of SMEs

Type

Small

Medium

Number of Employees

Fixed Asset (THB million)

Number of Employees

Fixed Asset (THB million)

Manufacturing

No more than 50

No more than 50

51-200

51-200

Wholesale

No more than 25

No more than 50

26-60

51-100

Retail

No more than 15

No more than 30

16-30

31-60

Service

No more than 50

No more than 50

51-200

51-200

Source: Office of the Council of State.

copy the linklink copied!SME lending

Commercial bank lending to SMEs is significant. In 2017, outstanding SME loans totaled THB 4 220 624 billion representing 50.47% of all outstanding business loans. That year, the number of SMEs with loans from Thai commercial banks (not including specialised financial institutions) was 520 461.

SMEs can also obtain loans from specialised financial institutions, cooperatives, and other community-level financial institutions.

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Table 46.5. Number of SMEs with financing from Thai commercial banks

All SMEs (Number)

SMEs with financing from Thai commercial banks (Number)

Overall

Juristic Persons

Individual Persons

3 004 679

520 461

132 052

388 409

100%

17.3%

4.4%

12.9%

Source: Bank of Thailand.

copy the linklink copied!Credit conditions

The credit quality of SME loans stabilised as the global and domestic economies gradually recovered, helping businesses recover their financial health. In 2017, SME non-performing loans remained stable at 4.37% compared to the 2016 level of 4.35%, but were nonetheless higher than the NPL rate among all businesses, which was 3.01%.

copy the linklink copied!Alternative sources of SME financing

SMEs in Thailand have access to alternative sources of funding such as the Market for Alternative Investments (MAI) exchange, crowdfunding, and venture capital.

The Market for Alternative Investments (MAI) is a stock exchange for smaller firms. It provides SMEs with a platform to raise capital at a lower paid-up capital than in the Stock Exchange of Thailand. Through the MAI exchange, SMEs can raise capital if they have over THB 50 million in paid-up capital following an IPO. In 2016, 150 companies were listed on MAI for a total market capitalisation of THB 339 billion.

Crowdfunding is another channel for SMEs to access funds. Under the supervision of the Securities and Exchange Commission, companies may raise funds from a pool of investors through equity-based crowdfunding.

Venture capital provides an opportunity for companies to access funding from investors, including financial institutions. Venture capital funds in Thailand benefit from certain tax privileges such as exemption from income tax. The Bank of Thailand revised its Regulations on Venture Capital and FinTech Businesses of Financially Consolidated Groups. The objectives of the revision were to increase unlisted companies’ access to alternative funding, especially for SMEs and FinTech firms, and to enhance effective development of financial services provided by financial institutions and conglomerates.

copy the linklink copied!Government policy response

SME access to commercial bank loans is constrained due to their general lack of credit history, collateral, and reliable financial statements. To tackle these limitations, the government has introduced various measures to ease SME access to funding. In addition, the government has launched capacity-building programmes to boost SMEs’ competitiveness.

For example, the Thai Credit Guarantee Corporation (TCG) was established to ease SMEs’ financial constraints by providing credit guarantees for viable small enterprises with inadequate collateral. In 2009, the TCG introduced the Portfolio Guarantee Scheme designed to stimulate bank loans to SMEs. Since then, there have been six Portfolio Guarantee Schemes as well as guarantee schemes for start-up SMEs and micro-entrepreneurs. The outstanding guarantee amount has increased over the years and totalled THB 353 billion at the end of 2017, guaranteeing 293 316 SMEs in TCG’s portfolio .

Another measure that has promoted SME access to finance is the Business Collateral Act B.E. 2558 (2015). Prior to the Act, lenders could create security interests over their borrowers’ property and movable assets to secure loans. However, borrowers had to physically deliver their pledged movable assets to the lender, which was operationally impractical for a number of reasons. The Act has allowed security interests to be created without the need to physically deliver assets and also expanded the types of collateral which SMEs can register and use to secure loans. Collaterals eligible to be registered as securities include receivables, inventory, and intellectual property. In conjunction, the Bank of Thailand has also revised several financial regulations. In particular, amendments have been made to regulations concerning asset classification, the provisioning of financial institutions, collateral appraisals, foreclosure procedures, credit guarantees and public auctions. All of these revisions have permitted more types of collateral to be used to secure loans and deducted from loan value prior to underwriting.

Various government agencies have also launched capacity-building programmes to boost SMEs’ competitiveness through skill development, product development, and market access. Initiatives have ranged from coaching programmes which enable knowledge transfers from capable enterprises and SMEs to local SMEs and international counterparts. In 2016, the Office of SME Promotion undertook 37 projects worth over THB 5 billion for promoting and supporting SMEs. As of March 2017, 23 projects had been completed, while 14 others were still ongoing. The results of the SMEs promotion activities in 2016 reflected the direction of SME promotion based on the Business Life Cycle. All projects were designed in response to the different needs of four groups (Startup Group, Strong and Regular Group, Turn-around Group, and Ecosystem Group), focusing on incentives aiming to develop and incubate start-ups, enhance productivity and innovation in SMEs, promote market access and internationalisation, and create a conducive legal ecosystem and infrastructure.

Furthermore, the SME One-Stop Service Center was established to gather SME data, provide free consultancy service regarding for example product development and financial management, and facilitate registration of SMEs. These initiatives are ongoing to provide continual knowledge and capital development to support SMEs.

There is also a government initiative to create a data ecosystem which allows data sharing and will be accessible to all stakeholders in order to support information-based activities including lending, this will offer more opportunities for SMEs to obtain credit.

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Figure 46.1. Trends in SME and entrepreneurship finance in Thailand
Figure 46.1. Trends in SME and entrepreneurship finance in Thailand

Source: See Table 46.6.

Note: 2007 and 2008 data for SME non-performing loans not available.

 StatLink https://doi.org/10.1787/888934117991

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Table 46.6. Definitions and sources of indicators for Thailand’s scoreboard

Indicator

Definition

Source

Debt

Outstanding business loans, SMEs

Outstanding amount of SME loans (excluding financial business) provided by banks (excluding specialized financial institutions) at the end of period. According to the Ministry of Industry, SMEs are categorized by the value of fixed asset (excluding land) and number of employees. Manufacturing and Services SMEs are enterprises with value of fixed asset less than THB 200 million or number of employees less than 200 persons. Wholesale SMEs are enterprises with value of fixed asset less than THB 100 million or number of employees less than 50 persons. Retail SMEs are enterprises with value of fixed asset less than THB 60 million or number of employees less than 30 persons

Bank of Thailand

Outstanding business loans, total

Outstanding amount of all loans provided by Thai commercial banks (excluding specialized financial institutions) at the end of period.

Bank of Thailand

Outstanding short-term loans, SMEs

*Data in this field is no longer provided due to a change in data collection methodology.

 

Outstanding long-term loans, SMEs

*Data in this field is no longer provided due to a change in data collection methodology.

 

Government loan guarantees, SMEs

Outstanding SME loans guaranteed by Thai Credit Guarantee Corporation at the end of period.

Thai Credit Guarantee Corporation (Operating Performance Report)

Non-performing loans, total

Figures cover all enterprises in the Thai banking system.

Bank of Thailand

Non-performing loans, SMEs

SME loans that are 90 days past due date. Figures cover all SMEs in the Thai banking system.

Bank of Thailand

Interest rate, SMEs

*Data in this field is no longer provided due to a change in data collection methodology.

 

Interest rate, large firms

*Data in this field is no longer provided due to a change in data collection methodology.

 

Interest rate spread

*Data in this field is no longer provided due to a change in data collection methodology.

 

Collateral, SMEs

*Data in this field is no longer provided due to a change in data collection methodology.

 

Percentage of SME loan applications

*Data in this field is no longer provided due to a change in data collection methodology.

 

Rejection rate

*Data in this field is no longer provided due to a change in data collection methodology.

 

Other indicators

Payment delays, B2B

*Data not available from the Bank of Thailand

 

Bankruptcies, SMEs

*Data not available from the Bank of Thailand

 

References

Department of Business Development. (2015). Business Collateral Act B.E. 2558 (2015). Retrieved from Department of Business Development website: https://www.dbd.go.th/more_news.php?cid=1033&filename=law_secutran

Office of the Council of State. (n.d.). Ministerial regulation of The Ministry of Industry (2002). Retrieved from Office of the Council of State website: http://www.ratchakitcha.soc.go.th/DATA/PDF/00102303.PDF

Stock Exchange of Thailand. (2017). Market Statistics. Retrieved from Stock Exchange of Thailand website: https://www.set.or.th/th/market/market_statistics.html

Thai Credit Guarantee Corporation. (2017). Operating Performance. Retrieved from Thai Credit Guarantee Corporation website: http://www.tcg.or.th/aboutus_operating_performance.php

Thai Office of SMEs Promotion. (2017). Annual report 2016. Retrieved from Thai Office of Small and Medium Enterprises Office Promotion website: http://www.sme.go.th/upload/mod_download/รายงานประจำปี%20สสว.%202559_OSMEP%20Annual%20Report%202016-20171102231101.pdf

Thai Office of Small and Medium Enterprises Office Promotion. (2016). White Paper on Small and Medium Enterprises of Thailand 2015. Retrieved from Thai Office of Small and Medium Enterprises Office Promotion website: http://www.sme.go.th/en/download.php?modulekey=94

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