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SME Development Bank of Thailand

SME Development Bank of Thailand. Topics. SMEs in Thailand SME BANK Corporate Profile and Operations Example Loan SMEs Development Program. SMEs in Thailand. The Importance of SMEs to the Thailand ’ s Economy. Employment Creation. Generating Foreign Currency Income.

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SME Development Bank of Thailand

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  1. SME Development Bank of Thailand

  2. Topics • SMEs in Thailand • SME BANK Corporate Profile and Operations • Example Loan • SMEs Development Program

  3. SMEs in Thailand

  4. The Importance of SMEs to the Thailand’s Economy Employment Creation Generating Foreign Currency Income Development for Various Types of Skills Linked with Businesses of Large Enterprises Creation of New Entrepreneurs Creating Competition and a High Quality Service Culture Increasing Utilization of Domestic Products

  5. Overview of the SME Sector in Thailand • Production Value 43.0% of GDP (Not included Agriculture) • Export Value 30.0% of Thailand Total • Employment 78.0% of Thailand Total Employment 99.7% of all enterprises are SMEs SME Classification: by employment and fixed assets Definition Small Medium Number of Fixed Assets Number of Fixed Assets Employees excl. land Employees excl. land (THB mm) (THB mm) Manufacturing 50 or less 50 or less 51-200 > 50 to 200 Service 50 or less 50 or less 51-200 > 50 to 200 Wholesale 25 or less 50 or less 26-50 > 50 to 100 Retail 15 or less 30 or less 16-30 > 30 to 60 Source : OECD Research Paper

  6. Unique Position in Thailand’s Bank Market • SME Bank is set-up as an organization for which profit maximization is not the primary goal - it is the Bank’s policy not to compete with commercial banks • SME Bank collaborates with other special financial institutions and provides funding to SMEs which cannot obtain loans from commercial banks • SME Bank does not compete directly with the other SFIs - Bank of Agriculture and Agricultural Cooperatives and Government Savings Bank performs lending roles with an emphasis on different areas Specialized Financial Institutions for SMEs SME Development Bank of Thailand Bank of Agriculture and Agricultural Cooperatives “SME Bank” Building an entrepreneurial society Total Solutions Smart SMEs, First-time exporters “Rural Development Bank” On-farm and off-farm community enterprises Export-ImportBank of Thailand Government Savings Bank “Exporter’s Bank” Full banking service Export insurance and investment abroad “People’s Bank” To develop human capital Small Business Credit Guarantee Corporation (SBCG) To provide Credit Guarantee for SMEs’s loans approved by banks.

  7. SME BANK Thailand SME Development Bank of Thailand “SME Bank” Building an entrepreneurial society Total Solutions Smart SMEs, First-time exporters

  8. Corporate Profile and Operations

  9. The Bank’s History The government has a long history in supporting small and medium enterprises. In 2002, it changed the role and name of the Policy Bank to Small and Medium Development Bank of Thailand (SME Bank), with the objective of providing financial and developing services to SMEs 1964 1991 2000 2002 • Established as the Small Industry Finance Office (SIFO) under the Department of Industrial Promotion, Ministry of Industry to provide financial support to small industries • As a government-owned financial institution and solely funded from the National Budget, SIFO’s services was limited and could not enjoy all the flexibility enjoyed by other FIs • Re-established by Act of Parliament as the Small Industries Finance Corporation (SIFC) under the Ministry of Finance and Ministry of Industry . Commenced operations again with an initial registered capital of THB 300 million, SIFC was able to source funds both domestically and overseas • SIFC was recapitalized to THB 2.8 billion, with Ministry of Finance holding 92% of the shares • Reactivated by Act of Parliament as the Small and Medium Development Bank of Thailand (SME Bank) under Ministry of Finance and Ministry of Industry. SME Bank was formally established on 20 Dec 2002 with all assets, businesses, debts, capital, profits, reserves, etc transferred from SIFC. The authorized capital has been increased to THB 10 billion

  10. Vision and Mission Vision “The Financial pillar that supports and promotes Thai SMEs”” Mission - To support the government policies to assist and promote Thai SMEs - To provide financial services that respond to Thai SMEs demands - To promote and develop Thai SMEs along with the financial support - To develop the information technology system and the organization  management  to be effective under the concept of the good corporate governance

  11. Network 14District Areas 1Bureau 94Business Development Centers 1,695 Officers

  12. General Loan Policy Loan Other Service Credit & Service Economic Crisis Long Term Credit (Term Loan) SMEs Potential Development Short Term Credit (P/N) Food and Restaurant Factoring OTOP and Grass Root Leasing and Hire Purchase New Entrepreneurs Trade Finance Intellectual Property Capitalization Joint Venture AVAL Letters of Guarantee Advisory Service Market Channel

  13. Outstanding as of the end of February

  14. Outstanding as of the end of February

  15. Economic Crisis Policy Loan Product SME POWER for Thai Strong Program2 Measures for Exporter SME POWER for Tourisms SME POWER for A New Start Thai Logistic Business Measures for Flood Victims Intellectual Property Capitalization Machinery Capitalization Royal Land Tenants Gems and Jewelry Business NGV Energy Conservation Hire Purchase for NGV Van Hire Purchase for NGV Car SME Potential Development Intellectual Property Capitalization Product Food and Restaurant New Entrepreneur OTOP and Grass Root Franchise Small Business ( Retail ) Innovative New Entrepreneur Creation Thai Cuisine to the WorldII OTOP Civil Sector Debt Relief

  16. Operation Performance in 8 years 2003 2004 2005 2006 2007 2008 2009 2010

  17. Example Loan

  18. Example Loan • Economic Crisis • Disaster • Political We provide for

  19. Loans to help sustain employment and minimize layoffs Objective Support SMES who were effected from Economic Crisis to operate and minimize layoffs or expand increase in employment SMEs who registered and allowed in commitment with Social Security Office Target Credit Amount of Project 5,000 million baht Performance 25,200 million bath Not over 50 Million Baht / Case Condition Amount Interest Rate 5% 5 years (Not over year 2014) • Land /land and buildings/ buildings/condominiums/apartments/ machinery/equipments or • the rental agreement for the property owned by the State Property,  the Treasury Department • - Letter of Guarantee from an individual or a juristic person • - Cross Guarantee among applicants • - Letter of Guarantee issued by the Small Business Credit Guarantee Corporation (SBCG) Collateral

  20. SMEs Measures for Baht Appreciation Objective Liquidity Support for SMEs Exporter who were effected from Baht Appreciation SMEsExporter or Related Supplier Target (Credit Amount of Project 2,500 million baht ) Performance 126 million bath Not exceed 10% of the purchase order value (July – September 2010) but not over 5 million Baht Amount Condition Year 1 -2 = MLR of GSB - 1.5% ( GSB Rate = 6.0 %) > Year 3 = SME BANK Rate ( 7 %) Interest Rate Collateral Guaranteed by an individual/ a juristic person/or The Small Business Credit Guarantee Corporation ( SBCG )

  21. Public Debt Control Project (Informal Debts) Objective Tosolving informal debts in the public sectors Applicants with no more than Bt. 200,000 in the remaining debt(s) must register in the Informal Debt Account with the Government Savings Bank or The Bank for Agriculture and Agricultural Co-operatives. The debts must also incur before November 19, 2009 and must be registered within the required period (December 1-30, 2009) Target (Credit Amount of Project - baht) Performance 382 million bath Bt. 50,000 - 200,000 / Case Condition Amount • - MLR annually for loans of Bt. 100,000 and under • MLR + 2.0% annually for loans of Bt. 100,001 - 200,000 • MLR as announced by the bank (currently the MLR is 7.0% per year) Interest Rate Collateral - One guarantor for loans of no more than Bt. 100,000 - Two guarantors for loans of Bt, 100,001 - 200,000

  22. SME POWER Loan for " Thai Strong Program" project 2 Objective To be the Cash flow for business , Business development ,Payment SMEs or government-supported overseas business entrepreneurs, such as in construction business Target (Credit Amount of Project 20,000 million baht) Performance 4,095 million bath Not exceed 500 million Baht/ Case Condition Amount Fixed term loan 1st year MLR-2 per year2nd year MLR-1 per year 3rd year onwards MLRper year Interest Rate • Land /land and buildings/ buildings/condominiums/apartments/ machinery/equipments or • the rental agreement for the property owned by the State Property,  the Treasury Department • - Letter of Guarantee from an individual or a juristic person • - Cross Guarantee among applicants • - Letter of Guarantee issued by the Small Business Credit Guarantee Corporation (SBCG) Collateral

  23. Measures to aid clients impacted by major disasters Objective To help damaged or impacted SMEs recover. SMEs and SME BANK clients in Bank-designated disaster areas that were devastated by floods, storms, mudslides, earthquakes or are indirect impacted by designated disasters Target (Credit Amount of Project 5,000 million baht) Performance 4,998 million bath Condition Amount Not more than Bt 500,000. 1. Existing clients - interest rate is MLR for whole contract term 2. SME disaster victims - interest rate is MLR+0.5% per year Interest Rate • Land /land and buildings/ buildings/condominiums/apartments/ machinery/equipments or • the rental agreement for the property owned by the State Property,  the Treasury Department • - Letter of Guarantee from an individual or a juristic person • - Cross Guarantee among applicants • - Letter of Guarantee issued by the Small Business Credit Guarantee Corporation (SBCG) Collateral

  24. “SME Power for a New Start” Objective To be used as cash flow for business Owners of Small and Medium Enterprise whose business is damaged by the recent political protest in Bangkok area Target (Credit Amount of Project 8,000 million baht) Performance 7,311 million bath Condition 1 million Baht maximum / Case Amount 1. Damaged from fire : - Year 1st : 0 % , Year : 2nd - 6th = 3% 2. Effect but not damage : - MLR – 3 % Interest Rate None Collateral

  25. Loan to ease the situation of tourism business affected by economic downturn and local political unrest Objective To support small and medium entrepreneurs in tourism business affected by economic downturn and local political unrest Small and medium entrepreneurs in tourism and related business affected by economic downturn and local political unrest Target (Credit Amount of Project 5,000 million baht) Performance 4,496 million bath 50,000-5,000,000 Baht/ Case Condition Amount - For the first 2 years, the interest rate equals to MLR - 3 per year - For the third year onwards, the interest rate equals to MLR Interest Rate • Land /land and buildings/ buildings/condominiums/apartments/ machinery/equipments or • the rental agreement for the property owned by the State Property,  the Treasury Department • - Letter of Guarantee from an individual or a juristic person • - Cross Guarantee among applicants • - Letter of Guarantee issued by the Small Business Credit Guarantee Corporation (SBCG) Collateral

  26. SMEs Development Program

  27. Problems and Obstacles of SMEs in Thailand • Lack of Competitive Advantages in areas such as: • Use of technology/information technology • Innovation and Product Development • Marketing • Productivity • Labor & Manpower • Deficiencies in Good Governance • Most SMEs have limitations in the application of good corporate governance and efficient management systems Problems & Obstaclesof SMEs* • Limitations in Gaining Access to Funds • SMEs have difficulty in obtaining loans from commercial banks because they do not meet basic requirement of the banks in terms of professional management and standard accounting procedures • SMEs cannot mobilize funds from the capital market • Government Efforts in Promoting SMEs • In the past, the government sector has lacked a systematic approach although agencies were assigned to manage their respective area • Lack of coordination and the absence of a comprehensive and systematic SME promotion plan • To successfully implement the government’s national agenda with regard to SME sector development, SME Bank, as a specialized financial institutions, has been mandated to provide various forms of financing and business development services to SMEs

  28. How to increase SMEs GDP Gov’t • Survive/Profit increase • Grow with more profit/ increase R &D / market expansion SMEs Small enterprises Low cost of funding Financial Weakness Capital Fund Medium enterprises Before lending Provide knowledge for readiness Low cost funding • Lack of knowledge • - Management - Marketing • - Technology & Innovation • - Production standard • - Accounting PSA Increase ability to compete of SMEs After lending Provide knowledge/marketing Budget for SMEs development Employment SMEs GDP Upgrade in production standard External issues/ FTA Income distribution TAX

  29. SME Development • Aim to Support and Develop Entrepreneurs both before and after lending credit • Increase Potential and Capacity in competition to Thai SMEs

  30. Training

  31. Business Diagnosis • Shin – Dan Program • Diagnosis and Kai-zen for • SME BANK Clients • Seminar to prepare • for improvement • and • - Consulting for implementation

  32. Market Place Holding the activities for helping SME BANK’s Client to sell their products at various place such as SME BANK TOWER , Government organization and Alliance place in domestic and international i.e. Ministry of Finance, Ministry of Industry, included other provinces of Thailand

  33. Mass Communication for Clients Visit SME BANK Entrepreneurs by mass media for helping in Public Relations including creating SMEs image SME Catalogue SME Catalogue for publishing SME BANK’s Client Product over 500 businesses target group both domestic and international purpose to support with increase in channel marketing 32

  34. Business Matching Holding Business Matching with Japan Finance Cooperation in Automobile and Electronic Spare Parts Cluster

  35. THANK YOU

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