Thailand unveils $2.8b soft loan scheme

Thailand’s cabinet approved a 100 billion-baht ($2.8 billion) stimulus package on Tuesday to bolster credit access for small businesses struggling with high borrowing costs.

The programme aims to assist small businesses in obtaining loans. The Government Savings Bank will provide liquidity to commercial banks at a 0.01 per cent interest rate, enabling them to lend to small businesses at a maximum rate of 3.5 per cent per year.

In comparison, current retail lending rates charged by Thai banks typically exceed seven per cent.

The two-year programme will be available to smaller businesses, with loan applications open until the end of 2025.

This initiative will inject much-needed capital into the system, said Deputy Finance Minister Paopoom Rojanasakul. He emphasised that the programme leverages the state bank’s resources and won’t directly impact the national budget.

The soft loan scheme is a response to concerns about tightening credit conditions by banks. Thailand’s economic recovery remains sluggish, and bad debt levels have risen.

Prime Minister Srettha Thavisin has pledged to roll out additional measures next week, including addressing high electricity prices, in an effort to stimulate growth in Southeast Asia’s second-largest economy.

Earlier this year, in response to the Prime Minister’s request, Thai banks agreed to a six-month period of reduced lending rates (by 25 basis points) for vulnerable groups.

The government has also pressured the Bank of Thailand to lower its key interest rate to support economic activity. However, the central bank maintained its policy rate at 2.50 per cent for the fourth consecutive meeting in June.

The Bank of Thailand projects economic growth of 2.6 per cent for 2024, following a modest expansion of 1.9 per cent in 2023, which fell short of regional benchmarks.

Attribution: Reuters