‘Limited funding sources forcing Thai SMEs to rely on informal economy’
Most small and midsize enterprises (SMEs) rely on the informal economy as they cannot access proper sources of funding, according to the Federation Thai SME, which called for more incentives and measures to help this group.
Speaking at a seminar titled “Credit Guarantee Mechanism, Helper for SMEs in Accessing Funding” held by the Bank of Thailand last week, the federation’s president, Saengchai Teerakulwanit, said that the Thai grassroots economy continues to slow down, with some yet to recover post-pandemic.
Saengchai attributed the slowdown to most Thai SMEs being unable to access proper sources of funding and needing to rely on the informal economy.
To bring the SMEs into the economic system, incentives are necessary, like accessible low-cost funding sources so as to strengthen and increase the capacity of the businesses, he said.
He disclosed that SME loans currently make up only 20% of the total loan portfolio of 18 trillion baht in commercial banks, whereas in state banks, SME loans account for approximately 39% of their loan portfolio.
The SME chief called for three measures from the government: help SMEs access low-cost funding and rehabilitate non-performing loans, enhance their capabilities, and amend some laws and regulations.
Saengchai said businesses encountered high interest costs, lacked collateral for loans, the loan application process was complicated and slow, and there was a lack of knowledge on how to access funding when they needed to borrow.
"Mechanisms to educate entrepreneurs both before and after applying for loans is needed for SME entrepreneurs who are not yet in the system and are not ready due to insufficient knowledge," he added.
Another speaker at the seminar, Somchai Jitsuchon, a research director of inclusive development at the Thailand Development Research Institute, said that the average age of Thai SME business owners in 2023 was around 50 years, and about 30% of SME owners had a bachelor's degree, while 25% had only completed primary education.
Somchai suggested that this situation may hinder SMEs' ability to adapt to the rapidly changing world, so measures to enhance the capabilities of SMEs and support their competitiveness were crucial.
