Central bank governor unveils measures to combat ‘Grey Capital,’ address household debt and structural weaknesses to unlock 100 billion baht in SME loans by 2026.
The Bank of Thailand (BOT) is dramatically expanding its mandate to tackle deep-seated structural issues in the nation’s economy, announcing the establishment of a Credit Guarantee Fund intended to unlock 100 billion baht in lending for small and medium-sized enterprises (SMEs) by 2026.
Speaking at his “Governor Connect Tour” event in Chiang Mai, BOT Governor Vitai Ratanakorn stated that while the central bank’s traditional role focused on macroeconomic stability, structural weaknesses now pose a significant risk.
Vitai stressed that the economy could not recover while SME credit continues to contract, a trend that has persisted for 13 consecutive quarters.
“Many SMEs need loans but are unable to obtain them because financial institutions are reluctant to lend due to high credit risk costs,” Vitai explained. “We must create a new credit guarantee mechanism to reduce this burden.”
The new fund, which will be set up in collaboration with the Ministry of Finance and the Thai Bankers’ Association, will utilise approximately 20 billion baht from the Financial Institutions Development Fund (FIDF) to guarantee credit.
This cover is expected to reduce bank credit risk by an average of 20 per cent, incentivising greater lending to target sectors such as processed food, wellness, and green and digital investments. The fund is expected to be operational next year.