TCG lends a helping hand to small businesses
New chairman says company is changing course to engage with SMEs, writes Wichit Chantanusornsiri
Mr Sittikorn said TCG had set a credit guarantee target of 120 billion baht this year.
Thai Credit Guarantee Corporation (TCG), a state-owned specialized financial institution, is leveraging digital technology and new strategies to help more small and medium enterprises (SMEs) access loans from financial institutions.
New TCG Chairman Sittikorn Direksoonthorn said his goal is to increase the number of SMEs that can access loans from financial institutions this year to at least 40% of the total number of SMEs in Thailand, which are estimated at 3 million. .
He said only about 20% of all SMEs can now access these loans.
Mr. Sittikorn said TCG has adjusted its strategy to achieve this goal. The company is planning a more proactive approach, instead of waiting for financial institutions to send their customers to apply for TCG’s credit guarantee.
He said that without this change in strategy, the number of SMEs with access to loans would remain at the same low level.
SMEs, especially micro-SMEs or very small traders, need funds to support their activities, which are suffering the effects of the pandemic and the Russian-Ukrainian war.
THREE NEW ENGINES
“TCG is using three new engines to achieve the organization’s goal,” Mr. Sittikorn said.
The first engine is called “design product by segment”. Under this concept, TCG will work with banks to design credit guarantee products that meet the demand of SMEs, he said.
For example, TCG can work with banks to develop a credit guarantee for SMEs that are members of the Federation of Thai Industries or the Thai Board of Trade. Most of these SMEs are suppliers to large companies.
Mr Sittikorn said TCG had already proposed the idea to the Board of Trade, which has around 10,000 SME members.
The second driver is called “new culture”. TCG promotes a new corporate culture in line with its digital adoption.
The company wants to work faster, like a fintech company, with the idea of helping weak SMEs survive economic uncertainties, he said.
Mr Sittikorn said that while TCG uses the general criteria of a financial institution to consider extending credit guarantees to SMEs, most of them are unlikely to qualify for loans in a weak economy. That means only the same small subset of SMEs that are in strong financial health would be able to access loans, he said.
In the past, some SMEs wouldn’t get bank loans because they didn’t know how to prepare business accounts, had bad credit records, or racked up a mountain of debt.
The third driver is called “new business model”, referring to TCG’s connection with the country’s key digital infrastructure. This infrastructure includes the national digital identification platform, the system for managing and exchanging interbank transactions, as well as a data link with the Department of Business Development.
All of these connections should enable TCG to serve SMBs more quickly through digital mode, Sittikorn said.
He said TCG also plans to create data links with financial institutions to promote seamless coordination with lenders and reduce paperwork.
These connections should reduce TCG’s overall costs and allow it to provide near real-time services, Sittikorn said.
The company wants to link up with major e-marketplaces as they play a crucial role in the world of modern commerce, he said.
AT THE SERVICE OF MICRO-SMEs
The TCG has been essential for SMEs during the pandemic, Mr Sittikorn said.
He said many businesses in Bangkok closed after the pandemic hit Thailand’s economy. Employees of these companies have returned to their home towns and some have become micro-entrepreneurs.
TCG is needed to extend support to these micro-entrepreneurs so they can access loans to run their businesses, Mr Sittikorn said.
He said that in 2020-2021, all SMEs suffered from the impact of the pandemic, but micro-enterprises suffered the hardest hit.
In terms of ratio, out of 100 companies on the TCG’s Non-Performing Guarantee (NPG) list, 70 were micro-enterprises. However, these NPG micro-enterprises only represent 15-18% of its total NPG amount, considering their low lending level of around 120,000 baht per enterprise.
Mr Sittikorn said helping micro-SMEs access loans means they can avoid loan sharks, who charge a very high annual interest rate.
Some loan sharks charge an interest rate of up to 36% per year.
He said the SME sector is one of the pillars of the country’s economy as it accounts for 70% of total employment in Thailand and generates 40% of the country’s GDP.
In addition to extending credit guarantees, TCG also provides financial advice to SMEs, Mr Sittikorn said.
He said that this year, TCG has set its credit guarantee target at 120 billion baht.
The company’s NPGs at the end of last year accounted for 9% of total outstanding credit guarantees, down from 11% in 2020 and 15% in 2019.