Rapid Assessment for Resilient Recovery and ... - GFDRR

Suggestions for short-term measures are summarized as follows (see details in Table
22):
- Conduct more visible marketing and a knowledge dissemination campaign, so
the public is better aware of the financing/debt relief options to them. The low
up-take on programs such as the soft loans for SSF members is partly being
blamed on lack of awareness. Note that this measure should take place after the
issues below have been explored and addressed;
- Three years debt suspension for six SFIs borrowers of under THB 500,000: this
appears to be a very long grace period, and most importantly, that is available to
any small borrowers in flooded areas. Previously, some of the debt relief schemes
were to be limited to those borrowers who could demonstrate that they lost more
than 50 percent of their productive assets – this would be sensible in this case
also. Different grace periods, depending on industry, would also be sensible.
Finally, an interest grace period (even if restructured and lower) of only one year
would also help to ensure borrowers remain used to making payments;
- Same recommendation as above for the 3 year debt suspension for cooperative
loans;
- Little information on microfinance was available beyond a THB 90 billion soft loan
program that was mentioned in the press on October 26, 2011. However, the lack
of further mention may mean that it has been dropped. Rather than disburse THB
90 billion to micro-entrepreneurs, it is recommended that the government explores
the possibility of using it as a guarantee to catalyze private banks’ wholesale
funding of MFIs who can demonstrate good governance;
- Low interest rate loans to farmers via BAAC: this is a prime example of an SFI
being put in a precarious position by having to provide a large volume of loans
(THB 60 billion, i.e. 10 percent of their assets), without these funds being provided
by the government, and thus not being able to separate these loans out from
other activities. Another issue to be explored is whether such loans, in the case of
rice farmers, should only be made available to rice farmers who do not grow more
than two cycles (to avoid flood risk);
- Thai Credit Guarantee Corporation (formerly the SBCGC) guarantees facility for
a portfolio of up to THB 100 billion of commercial bank loans to counter the floods.
It is suggested that a guarantee aimed at SMEs that have been damaged by flooding
would need to be much higher than 20 percent to have a significant impact on
private banks’ willingness to lend. It is recommended to look at the possibility of
starting with a more strict eligibility criteria (e.g., again, only SMEs that can prove
significant damage), but offer a guarantee of 50 or even 75 percent, throughout
the period of the loan. Then, if the take-up is slow, the eligibility criteria can be
loosened. Otherwise, it is feared that only a very small proportion of this potential
portfolio will actually materialize; and
- The THB 20 billion of virtually free loans being made available to commercial
banks to on-lend, on a 50:50 capital sharing basis, to impacted SMEs will report
edly have very few takers amongst commercial banks. This is because the usual
lending rate for SMEs is closer to 9.0–9.5 percent 75 , which would mean that even if
half the capital lent is almost free, the resulting blended cost of funds would remain
75 This is based on one commercial bank’s Minimum Retail Rate of 8.0%, and the fact that they lend amounts of under
THB 200,000 at this rate + 1.5 percent. Considering banks typically classify SME loans as a type of household loan, it is
expected that lending rates to SMEs would be around this level on average.
72 THAI FLOOD 2011 RAPID ASSESSMENT FOR RESILIENT RECOVERY AND RECONSTRUCTION PLANNING