Financial Access of SMEs in Thailand: What Are the Roles of the Central Bank?

In Thailand, information asymmetry problems between lenders and SMEs are evident. Credit access is found to increase with firms’ ages, assets and sales. Firms’ funding structures lean more towards debt funding rather than equity funding for medium and large size firms as well as those in the manufacturing sector. Information asymmetry is related to inadequate business experience and financial literacy of SMEs, and insufficient risk-based credit assessment and management. As a result, lending practice is still mostly based on collateral. The government initiatives as well as the Bank of Thailand (BOT)’s financial sector master plan have been geared toward lessening the problems. However, remaining financial gaps especially for the small firms still exist. Further roles of the BOT should focus on advocating relationship-based lending, promoting an increase in credit assessment capability of financial institutions, taking into account firms’ sizes, sectors, as well as stages of development when making credit policies, promoting and improving flows of information and financial literacy, and enhancing the evolving development of unofficial micro-finance units.