Services for Improving Financial Access (SIFA)

Client: BMZ (German Federal Ministry for Economic Cooperation and Development)
Country: Thailand
Lead executing agencies: SME Development Bank of Thailand (SME Bank), Bank for Agriculture and Agricultural Cooperatives (BAAC), Government Savings Bank (GSB), and Thai Bankers’ Association (TBA)
Overall term: 2 years

Background: A critical constraint to the competitiveness and the potential for business success of many Thai small and medium-sized enterprises (SMEs) is their lack of access to and the provision of customer-focused, financial services. Part of the problem is the SMEs’ lack of awareness and knowledge on the availability and variety of existing financial services offered in the marketplace. Another issue is the SMEs’ limited understanding of the specific type(s) of financial service products their businesses need to prosper and the different requirements for each product. The other side of the problem relates to the capacity of financial service providers to deliver high-quality, demand-oriented financial service products that address the unique credit qualifications of Thai SMEs operating at different stages along value/supply chains in different economic sectors.

Objective: The purpose of the financial services project is to enhance the competitiveness of Thai SMEs in selected agro-industrial sub-sectors through an improvement of the market for financial services, notably SMEs’ demand for financial services as well as the supply of high-quality and demand-oriented financial services. Financial service provider partners in the project include SME Bank, BAAC, GSB, and the Thai Bankers’ Association as well as other financial institutions, business associations and finance-related service providers.

Approach: The methodology involves conducting detailed analyses of each of the programme’s selected sub-sectors to identify key constraints and opportunities related to the improvement of the sub-sector’s competitiveness and then designing specific financial service solutions, which we call interventions, to address some of these challenges. In addition to these baseline analyses, an analysis of the Thai financial services sector was conducted to identify areas where business services can be offered and employed to improve financial institutions’ abilities to deliver new, innovative financial products to SMEs. Intervention areas identified include new product development targeted at growers and customer research services for financial institutions as well as the macro-level adoption of modern financial services collateral legislation and streamlined equipment registration and mortgaging. The project also acts as a service provider to the other projects and components within the programme to support and improve their intended overall objectives and impacts.

Impact: Results achieved Working together with partner public-sector and private-sector banks as well as the other projects in the programme, strategies have been formulated for all of the sub-sectors with seven financial service interventions identified and implemented. Some of the interventions being implemented include: the creation of an inventory-based unsecured loan product to enable fruit growing farmers to form larger-sized enterprises as well as to convert from conventional chemical-based to organic farming practices and the promotion of the draft Business Security Act which would allow Thai financial institutions to increase their lending to SMEs. The legislation would allow Thai financial institutions to take an enterprise’s short-term assets (eg accounts receivable and inventories) as legal collateral to support loans to SME borrowers.