Questionnaire on Credit Supplementation System & the 22nd ACSIC Conference s Theme Please send this form via email by July 15, 2009 to: The Secretariat The 22nd ACSIC Conference Small & Medium Enterprise Credit Guarantee Fund of Taiwan 4F., No. 6, Sec. 1, Roosevelt Rd., Taipei City 10066, Taiwan (R.O.C.) Tel.: +886-2-2321-4261 ext. 563 or 229 Fax: +886-2-2394-7317 Email: acsic22@smeg.org.tw Website: www.smeg.org.tw/acsic22.htm Name and Address of Institution Name of Institution: Small Business Credit Guarantee Corporation (SBCG) Address of Institution: 2922/243 Charn Issara Tower II, 18 th Floor, New Petchburi Road, Bangkok 10310, Thailand Representative: Mr.Surachai Danaitangtrakul, President (Acting) Telephone No.: (66 2) 308-2741 Fax No.: (66 2) 308-2749, 308-2309 Email: URL: intl@sbcg.or.th www.sbcg.or.th Contact Person Name: Position: Telephone No.: Ms.Yanee Ruamragsa Vice President, International Affairs Office (66 2) 308-2741 Ext.122 Fax No.: (66 2) 308-2749 Email: Yanee@sbcg.or.th p. 1/13 Institution: 16. SBCG
1. History of the system: (a) Establishment Questionnaire on Credit Supplementation System The Small Business Credit Guarantee Corporation (SBCG) was established by the Small Industry Credit Guarantee Corporation Act which was promulgated since December 30, 1991 by taking over all business and operations of the Small Industry Credit Guarantee Fund (SICGF). The establishment was resulted from SICGF s performances which accomplished its objective in enabling small enterprises, who have insufficient collateral but show business potential, to obtain more loans from financial institutions. (b) Changes September 1993 - Increased the maximum loan limit from Baht 10 million to Baht 20 million in which guarantee amount shall not exceed Baht 5 million for each enterprise. August 1994 - Increased guarantee fee from 1.5% to 2.0% of the guaranteed amount to be annually paid in advance. December 1994 - Requested personal guarantee to SBCG for all cases. March 1995 - Increased maximum limit of fixed assets of enterprises which are eligible for SBCG s service from Baht 20 million to Baht 50 million. December 1996 - Activated the first representative office in Nakhon Ratchasima. - Extended service coverage to wholesale & retail trade, service, export and import, in addition to small industries. - Increased the gearing ratio (Total guarantee outstanding / total capital fund) from 3:1 to 5:1 in order to support future operations. March 1998 - Put off claims payment from upon the final verdict to upon end of auction process after guarantor s collaterals were sold. November 1998 - Increased guarantee fee from 2% to 3% of the guaranteed amount to be annually paid in advance. March 1999 - Shortened claims payment from upon the final verdict and end of auction process after guarantor s collaterals was sold to upon the final verdict with attachment of all collaterals of borrower and guarantor. April 1999 - Reduced guarantee fee from 3% to 2%, 2.5% and 2.75% of the guaranteed amount depending on the size of the guarantee amount as follows:- Up to Bt. 1,000,000 : 2% per annum Bt. 1,000,001 Bt. 5,000,000 : 2.5 % per annum Bt. 5,000,001 Bt. 10,000,000 : 2.75 % per annum August 1999 - Enlarged the maximum guarantee limit for each single p. 2/13 Institution: 16.SBCG
enterprise from Baht 10 million to Baht 20 million. - Reduced guarantee fee from 2.00-2.75% to 1.75% of the guaranteed amount to be annually paid in advance. - Shortened claims payment from the final verdict with attachment of all collaterals of borrower and guarantor to once law suit was filed against borrower. September 1999 - Activated four regional offices located in Nakhon Ratchasima, Chiangmai, Songkhla and Phitsanulok. - Set up the Fund Investment Committee and the NPLs Management Committee. October 1999 - Set up the Audit Committee. - Set up claim and collection department, regional office administration department and planning and data processing department. - Increase the maximum limit of fixed assets of enterprises which are eligible for SBCG s service from Baht 50 million to Baht 100 million. December 1999 - Started business with two non-shareholder financial institutions i.e. Export-Import Bank of Thailand and the Bank for Agriculture and Agricultural Cooperatives. April 2000 - Initiated the Automatic Credit Guarantee Scheme to shorten lending approval period as a mean to better facilitate borrowers who request SICGC to guarantee loan up to Baht 10 million. The participating banks included Kasikorn Bank Plc. and Bankok Bank Plc. - Initiated guarantee scheme for high potential SMEs with NPL borrowers. The scheme was under cooperation with the Bank of Thailand. May 2000 - Started new regional office at Nakhon Ratchasima. June 2000 - Started new regional office at Chiangmai. - Extended the Automatic Credit Guarantee Scheme service to Krung Thai Bank Plc. and Siam Commercial Bank Plc. July 2000 - Injected new Baht 4 billion capital. October 2000 - Extended the Automatic Credit Guarantee Scheme service to Industrial Finance Corporation of Thailand. December 2000 - Started new regional office at Songkhla. January 2001 - Started new regional office at Chonburi. February 2001 - Extended the Automatic Credit Guarantee Scheme service to SMEs Development Bank of Thailand. March 2001 - Enlarged the maximum guarantee for each single enterprise from Baht 20 million to Baht 40 million. - Increased the maximum limit of fixed assets of enterprises which are eligible for SBCG s service from Baht 100 million to Baht 200 million. - Allowed borrowers with 3-year lease contract on the premises for up to Baht 5 million guaranteed by SBCG. - Started new regional office at Central Region. May 2001 - Extended the Automatic Credit Guarantee Scheme service to Bank of Asia. p. 3/13 Institution: 16.SBCG
- Introduced risk participation scheme to Krung Thai Bank Plc., Bank Thai Plc., Siam City Bank Plc., Bangkok Metropolitan Bank Plc.,(merged with Siam City Bank Plc.) and SME Development Bank of Thailand. October 2001 - Started new regional office at Suratthani and Udonthani November 2001 - Extended the NPL scheme to April 7, 2004. December 2001 - Increased the maximum guarantee amount for SMEs with 3-year lease contract on the premises from Baht 5 million to Bath 10 million. May 2002 - Started new regional office at Phitsanulok. June 2002 - Joined other specialized financial institutions to establishing the One Stop Shop (OSS). February 2004 - Revamped risk management practice by separating low- NPL financial institutions from high-npl financial institutions. More focused on strategic clusters i.e. food, vehicle, fashion and tourism. May 2004 - Revised the guarantee amount for Normal Scheme and Automatic Scheme: - Normal Scheme : Baht 10-40 million per case - Automatic Scheme : Baht 3 million per case - Reconditioned the Risk Participation Scheme. December 2004 - Introduced Credit Guarantee for Enterprises Affected by the Tsunami in the Six Southern Provinces: - Existing customer : waive the guarantee fee for one year - New customer : reduce the guarantee fee from 1.75% to 0.5% per annum in the first year with the maximum guarantee amount up to Bt 5 million February 2005 - Extended the Loan Guarantee Scheme service to financial institutions. September 2005 - Change its name from Small Industry Credit Guarantee Corporation : SICGC to Small Business Credit Guarantee Corporation : SBCG May 2006 - Increase Gearing Ratio from five times to seven times of the capital by Board resolution. February 2007 - Terminated the Automatic Credit Guarantee Scheme service to the contacted financial institutions. July 2008 - Increase Gearing Ratio from seven times to ten times of the capital by Board resolution. July 2008 - Injected new Baht 302.473 million capital. March 2009 - Introduced Portfolio Guarantee Scheme to Bank. 2. Objective of the system: The SBCG s objective is to provide credit guarantee for viable small enterprises which do not have enough collateral to enable them to obtain sufficient credit from the financial institutions in order to: 1. Increase credit extension from financial institutions to small enterprises. p. 4/13 Institution: 16. SBCG
2. Strengthen the confidence of financial institutions in providing credit to small enterprises. 3. Accelerate the dispersal of credit extension to small enterprises throughout the country. 4. Promote industrial development to achieve the target of the National Economic and Social Development Plan. 3. Items of your business: SBCG provides only credit guarantee service. 4. Organizational overview: (a) Legal Background, Corporate Status and Law Corporate status: State-owned enterprise Act: The Small Industry Credit Guarantee Corporation Act B.E.2534 (A.D.1991) (b) Organisation Chart Board of Directors Audit Committee Executive Committee Risk Management Committee Internal Audit Office President Risk Management Office Executive Vice President (Marketing and Business Unit) Executive Vice President (Corporate Services Unit) Office of the President Credit Guarantee Analysis Corporate HR Department Office of the International Department Affairs Guarantee Follow Up and Development Department Accounting and Finance Department Public Relation Office Information Technology Office of the Special Department Project Marketing and Business Department Corporate Planning and Strategy Department Regional Office Number of staffs: 103 (As at 30 June 2009) p. 5/13 Institution: 16.SBCG
(c) Competent Authority None (d) Affiliated Companies (if any) None 5. Capital: (a) Source of Paid-up Capital Capital: Baht 4,702 million The capital comes from the following sources as follows: - - Ministry of Finance 93.57% - Private Banks 3.40% - State-owned Banks 1.19% - Government Savings Bank 1.34% - SME Development Bank of Thailand 0.25% - Finance Institutions Development Fund 0.25% (b) Amount of Capital/Net worth Amount of Capital Net Worth : Baht 4,702 million : Baht 3,638.01 million (c) Recent Increase in Capital SBCG is now under the process of the increase in authorized share capital amounted to 2 billion. 6. Outline of the system: (a) Relationship between Organization and Related Institutions SBCG is under supervision of the Ministry of Finance and its policies and operations are formulated and supervised by the Board of Directors, mainly from the government and SBCG s Chairman is a representative of the Ministry of Finance (b) Relationship between the Lender (Creditor) - (c) Relationship between the Borrower (Debtor) - p. 6/13 Institution:16. SBCG
7. Operation of the system: (a) Schematic Flow Diagram Diagram I SMEs (1) (4) Loan Request Loan Disbursement Lenders (5) Claims submission (2) (3) (6) when the legal Guarantee L/G Issuance Claims proceeding against Application Payment the borrower SBCG Diagram II SMEs (2) SME s loans request + (5) Letter of Recommendation (1) Loan Inquire SMEs Disbursement SBCG (6) Claims submission (3) (4) (7) when the legal Guarantee L/G Issuance Claims proceeding against Application Payment the borrower Lenders (b) Brief Explanation The entrepreneurs can apply directly to SBCG to obtain Letter of Recommendation for loan request or can apply for SBCG service at any branches of the participating financial institutions. After the lenders find the case viable, but short of collateral and eligible for SBCG s guarantee, they will submit the guarantee application to SBCG together with necessary information and documents. If the application is approved, SBCG will issue the L/G to lenders after guarantee fee is paid by the borrower. Then the lenders approve the loan of which the unsecured portion is guaranteed by SBCG. In case those borrowers are definitely unable to repay outstanding debt and the lender had made every effort in enforcing the repayment, the lender can submit claim application to SBCG when legal proceedings shall be filed against the borrowers. SBCG will pay claims to lenders according to the amount specified in the guarantee agreement, p. 7/13 Institution:16..SBCG
including interest at the normal rate specified in the guarantee agreement calculated up to the date of legal action taken against the borrower by the lender, or calculated from the date of default to not over six months, whichever is earlier. 8. Eligible conditions for guarantee/insurance service: (a) Enterprises SBCG provides guarantee to all kinds of small industries such as manufacturing, handicrafts, service and agro-business. In addition, guarantee is also extended to four types of small businesses comprising wholesale & retail trade, service, import and export. The small enterprises which will be guaranteed by SBCG must have the following qualifications:- 1. The total net fixed assets on the date of loan application shall not exceed Baht 200 million. 2. The entrepreneur shall be a natural person or juristic person who has Thai nationality, and operates its business in Thailand (b) Financing Facilities SBCG can guarantee all kinds of credit offering by the eligible financial institutions. At present SBCG offers four guarantee schemes to SMEs through the financial institutions. Each scheme is priced at 1.75% annual fee, paid in advance. The details of each scheme are as follows: 1. Normal Scheme is provided for the SMEs eligible for loan from financial institutions on the non-collateralized portion of the loan for the amount of Baht 10-40 million. Under this scheme the financial institutions provide SBCG with the documents required by SBCG and SBCG appraises the loan before determining whether or not to approve the guarantee. Land and buildings of the project must be taken as collateral by the lender applying for SBCG s guarantee service. 2. Risk Participation Scheme was launched in May 2001 in order to build up more confidence of the financial institutions in providing credits to SMEs. Both Financial and SBCG will be sharing risks for loan extended. The maximum guarantee amount for this scheme is Baht 40 million. In May 2004, some conditions of the scheme have been relaxed as a mean to stimulate financial institutions to use the scheme. By sharing risk with financial institutions, SBCG can shorten approval process to meet higher satisfaction of borrowers. 3. Loan Guarantee Scheme was launched in Feb 2005 to guarantees long term loans from financial institutions on the non-collateralized portion of the loan for the amount not over than 10 million baths. This scheme provided only for SMEs at least 3 years operation, have profit in latest year and long-term loans of not longer than 7 years. 4. Portfolio Guarantee Scheme was launched in March 2009. There are 3 p. 8/13 Institution:16. SBCG
Guarantee types under Portfolio Guarantee Scheme: 1. Secured credit guarantee (normal) up to Baht 20 million per account. 2. Unsecured credit guarantee up to Baht 20 million per account. 3. Guarantee for NPL with business potential up to Baht 10 million per account. MOU has been signed between SBCG, Thai commercial banks and financial institutions for collaboration under the Portfolio Guarantee Scheme there by the financial institutions will be able to use SBCG s credit guarantee in a total amount of Baht 30 billion. (c) Eligible Financial Institutions Eligible financial institutions are Thai commercial banks, SME Development Bank of Thailand, the Government Savings Bank, the Export-Import Bank of Thailand, the Bank for Agriculture and Agricultural Cooperatives and the Islamic Bank of Thailand. (d) Maximum Amount The maximum guarantee amount shall not exceed Baht 40 million for each single enterprise. (e) Guarantee Fee/Insurance premium SBCG s guarantee fee will be charged at the rate of 1.75% per annum of the guaranteed amount, to be paid in advance. Financial institutions will collect the guarantee fee from the borrower and remit it to SBCG. (f) Collateral and Guarantor SBCG does not require any collateral for guaranteed loans. Normally, financial institutions accept land, building and machinery as collateral and the appraised value should be at least equivalent to the amount of the loan. The personal guarantee is required for all guaranteed projects with the exception of Risk Participation Scheme. The guarantor may be the same person as the lender and/or any persons who SBCG considers reliable and have sufficient assets. (g) Credit Investigation SBCG will conduct credit investigation from credit standing of the applicant, including all documents received from the financial institutions on the subject of types of industries or businesses, the objective of the credit application, records of repayment and qualifications of the enterprise eligible for SBCG s guarantee. After examining the primary information, SBCG will visit borrowers premise in order to assure that the projects are viable. If the application is eligible for credit guarantee, SBCB shall issue the letter of guarantee to the financial institution after receiving guarantee fee from the borrowers. p. 9/13 Institution: 16. SBCG
(h) Leverage/Gearing ratio The maximum limit of the aggregate of outstanding guarantee liabilities of the system is ten times of the capital. (i) Guarantee Coverage 1) Normal Scheme and Loan Guarantee Scheme SBCG will provide a maximum of 100% guarantee on the unsecured portion of the loan which shall not exceed 50% of the total loan. The maximum guarantee amount shall not exceed Baht 40 million for each single enterprise. 2) Risk Participation Scheme SBCG will provide a minimum guarantee amount of not less than the difference between the total principal of the credit and the appraisal value of the assets which shall not exceed 50% of the total loan. The maximum guarantee amount shall not exceed Baht 40 million for each single enterprise. 3) Portfolio Guarantee Scheme SBCG will provide minimum guarantee amount of not less than the difference between the total principal of the credit and the appraisal value of the assets which shall not exceed 50% of the total loan. The maximum guarantee amount on 3 types of Portfolio Guarantee:- - Secured (not least than 30% of total credit amount) credit guarantee up to Bt.20 million per account. - Unsecured credit guarantee up to Bt.20 million per account. - Guarantee for NPL with business potential up to Bt.10 million per account. (j) Source of Income The main sources of income are from guarantee fee and yield earned from private fund management. 9. Payment under guarantee/insurance: (a) Conditions for Payment 1) Normal Scheme and Loan Guarantee Scheme SBCG will pay claim to the lender when the legal proceedings are initiated against the borrower. 2) Risk Participation Scheme SBCG will pay claim to the lender when the legal proceedings are initiated against the borrower until the court has passed the final judgment and the lender has completed the execution. 3) Portfolio Guarantee Scheme SBCG will pay claim to the lender on compensation for loss will be made in 5 installments, starting from year 2 until the end of the guarantee. p. 10/13 Institution: 16. SBCG
(b) Coverage Payment 1) Normal Scheme and Loan Guarantee Scheme SBCG will pay claims to the lender on the amount stated in the L/G plus accrued interest at the normal interest rate specified in the Loan Agreement up to the date of legal proceeding against the borrower or up to the date of default to not over six months, whichever is earlier. The financial institutions are responsible for all expenses incurred in the legal proceedings. 2) Risk Participation Scheme SBCG will be liable for the principal at 50% of the actual loss (the difference between the principal and the proceeds obtainable from collateral enforcement or surrender of the collateral), but not exceeding the amount stated in the L/G plus accrued interest at the normal interest rate specified in the Loan Agreement or at the lower rate under the court judgment, from the date of default to not over six months or until the date of lawsuit brought by the lender to the civil court, whichever is earlier. 3) Portfolio Guarantee Scheme SBCG and the financial institutions have mutually agreed to set the maximum NPG and the proportion of compensation to be made by SBCG on a portfolio basis (NPG is non-performing credit guarantee for which financial institutions may claim from SBCG.) NPG 10. Recovery of payment: (a) Recovery Compensation by SBCG NPG < 12% 100% 12% < NPG < 14% 75% 14% < NPG < 18% 50% 1) Normal Scheme and Loan Guarantee Scheme SBCG will take legal action against the borrower and/or the guarantor after there is evidence that the borrower and/or the guarantor are capable of repayment. 2) Risk Participation Scheme Not applicable. (b) Subrogation - p. 11/13 Institution:16. SBCG
11. System problems: The use of guarantee service is purely on a voluntary basis and is dependent on the lenders cooperation as well as the economic situation and government policy. Various problems have arisen such as strengthening of recovery and financial foundation. 12. Latest operational results: Currency Unit in Amount : million US Dollar Item Acceptance of Guarantee Outstanding Guarantee/ Insurance Liabilities Payment under Guarantee Recovery Received Income from Guarantee Fee Number of Guaranteed Enterprises Non Performing Guarantee (NPG) Fiscal year 2005 2006 2007 2008 Number 3,376 1,916 2,298 1,366 Amount 217.71 210.35 185.12 93.90 Number 8,025 8,688 8,999 8,631 Amount 499.77 585.31 642.60 630.74 Number 60 101 124 113 Amount 5.60 12.29 9.88 8.78 Number N.A. N.A. N.A. N.A. Amount 0.63 0.69 1.11 1.50 Amount 7.45 9.28 10.56 10.44 Number Percentage 8,025 8,688 8,999 8,631 9.74% 14.87% 12.04% 18.90% Net Profit/Loss Amount -0.92-9.44-1.36-2.74 * Regarding the amounts, please display them in both your (million) home currency and that of million US Dollars. * Exchange rate: US$1 = 34.65 Baht (Exchange rate at May 25, 2009) p. 12/13 Institution:16. SBCG
Questionnaire on The 22nd ACSIC Conference s Theme The theme of the 22nd ACSIC Conference: The Measures Taken by Credit Guarantee/Insurance Systems to Exert the SME- Assistance Functions during the Global Financial Crisis. * The following questions/answers are quoted from the results of the survey made/permitted by the JFC, Japan early this year (2009). * To save your time, please provide/update the following information, if any. Please describe SBCG s efforts towards the current global financial crisis (1) Have SMEs in Thailand faced difficulties under the current global financial crisis? YES NO (2) Has SBCG implemented (or plan to implement) programs to support those SMEs? YES NO (3) What kind of measures has SBCG taken to support those SMEs? Enhancement of existing programs Establishment of a new program (4) Please describe the details of the measures of (3) and indicate whether they are conducted under SBCG s efforts or as a part of government s policies. Enhancement of existing programs By SBCG s own effort As a part of the government s policy The Government and the Bank of Thailand have sought measures to assist SMEs, with SBCG designated as the major mechanism to provide credit guarantee, which will in turn encourage financial institutions to increase lending to SMEs and hence greater and speedier money circulation in the economic system. Establishment of a new program By SBCG s own effort As a part of the government s policy Portfolio Guarantee Scheme is a new credit guarantee service program. The characteristic of the scheme is to speed the guarantee approval within 1-2days and in turn SMEs will be granted loan from financial institutions faster. ( Details of the scheme on Questionnaire page 9) p. 13/13 Institution:16. SBCG