Credit Supplementation for SMEs: Thailand Case Study 35th ADFIAP ANNUAL MEETING, ISTANBUL, TURKEY 35th ADFIAP Meeting Istanbul, Turkey Credit Supplementation for SMEs: Thailand Case Study Mr. Wiboon Perm-Arayawong, President Thai Credit Guarantee Corporation (TCG) Apr 25, 2012

Presentation Outline 3. CURRENT 4.STRATEGIC DIRECTION 2. DEVELOPMENT 1. ABOUT US Thailand & Credit Guarantee System Thai Credit Guarantee Corporation (TCG) 2. DEVELOPMENT Development, Outreach, Additionality, & Sustainability Lesson Learned 3. CURRENT CHALLENGES SMEs, Banks , & TCG Government 4.STRATEGIC DIRECTION Vision & Strategies Strategy Map

Thailand Area (km2) 513,120 GDP (mil USD) 318,522 GDP-PPP (USD) 4,150 Population (mil) 69 No. of Enterprises 2,924,912 No. of SMEs 2,913,167 % to Population 4.21 % to Total Ent. 99.59

Thai’s Credit Guarantee System 4 Loans disbursement 6 Claim payment Public Policies, Capital and Loss Compensation Letter of Guarantee issue 3 Bank SMEs 2 Application for Guarantee 5 1 Loan requests Claim submission when legal action is taken against the borrower.

Thai Credit Guarantee (TCG) Chiang Mai Phitsanulok UdonThani Nakhon Ratchasima Chonburi Ayutthaya Suratthani Songkhla Bangkok and Greater Bangkok Office A state-owned specialized financial institution (SFI) under the supervision of the Ministry of Finance. Established on December 30, 1991 as the sole Credit Guarantee Corporation in Thailand to assist viable SMEs to access to finance. There are 9 Offices covering all regions throughout Thailand.

Annual SME Outreach 2006-2011 (Million THB) No. of Guarantee Issued

Statistics of Credit Guarantee & NPG (FY 2003-2011) (Million THB) 2003 2004 2005 2006 2007 2008 2009 2010 2011 Cumulative Approved Guarantee Outstanding Guarantee

Percent of Outstanding Guarantee to Total SME Loan (%) (Mil. THB) 3,291,750 2,906,745 2,853,907 2,732,149 2,774,714 2,608,806 2,494,084

ADDITIONALITY 108 66 44 41 34 27 19 15 2003 2004 2005 2006 2007 2008 2009 2010 2011 Accumulated Job Creation Cumulative Approved Loan Guarantee

Financial Sustainability Annual Net Income Retained Earnings

1.5 Lesson Learned Thailand had lost opportunity to assist SMEs to access to finance effectively for 17 years with individual guarantee only. Portfolio guarantee scheme was proved to be more effective than individual guarantee Partial credit guarantee (PCG) is an effective public support scheme for crisis-response.

Thai SMEs

OUTSTANDING LOAN OF ALL BANKS Billion THB (Exchange Rate 30 THB/USD) 5 Yrs Avg. Growth Rate: Large 23.0 % p.a. Medium 8.8 % p.a. Small 2.3 % p.a.

NUMBER OF BORROWERS

2 /3 of SMEs Don’t Borrow from Banks How did this 2 million SMEs finance themselves?

Target SMEs Ration of SMEs (classified by group) from the total number of SMEs in Thailand (approximate 3 million SMEs) Group 6 Group 1 Group 5 Group 2 Group 4 Grou p 3 Guesstimate 600,000 SMEs Source: In 2009, OSMEP estimated the total number of SMEs throughout Thailand at 2,914,912 SMEs.

BANKS’ SME LOANS

CURRENT LOAN GUARANTEE % Guarantee to Their SME Loan % Guarantee to Their SME Loan

Strategic Direction Vision Be the well recognized national credit guarantee institute Mission Assist SMEs to access to finance Increase banks’ confidence to lend to SMEs Strategies Full market coverage strategy Integrated marketing communication strategy Collaborative strategy

Strategy Map Financial Perspective Customer Internal Learning & Growth Growth Strategy Productivity Strategy Risk Based Pricing New Customers New Products & Services Penetrations Reduce cost to serve Minimize NPGs Maximize use of Existing Assets OPERATION MANAGEMENT PROCESSES CUSTOMER MANAGEMENT PROCESSES INNOVATION PROCESSES REGULATORY & SOCIAL PROCESSES HUMAN CAPITAL INFORMATION CAPITAL ORGANIZATION CAPITAL Credit Guarantee Management Friendly Risk Management Targeting Recovery Growth Acquisition Retention Identify New Opportunities to Serve Customers Anticipate Future Customer Needs Corporate Governance Corporate Social Responsibility A CAPABLE, MOTIVATED, AND TECHNOLOGICALLY ENABLED WORKFORCE Values Skills Knowledge Core Credit Guarantee Solutions Decision Support System Infrastructure Culture Leadership Alignment Teamwork PROVIDE THE BEST TOTAL SOLUTION TO OUR CUSTOMERS IMAGE Fast Convenience Reliable Consultant Training Partner National Credit Guarantee Institute PRODUCT / SERVICE ATTRIBUTES RELATIONSHIP

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