From the ground up: Small business is the heart of the government growth strategy


Accounting for the majority of businesses and a significant source of employment and export earnings, small and medium-sized enterprises (SMEs) play an important role in Thailand’s economic development. The SME segment has struggled in recent years, however, and currently accounts for the largest proportion of non-performing loans (NPLs), while export-oriented SMEs have struggled to increase their share of the country’s total export receipts.

The government is intensifying its focus on SME development in 2017, launching a series of support mechanisms aimed at boosting SME exports, supporting digital business development and e-commerce activities, and increasing access to finance at commercial banks and the Thai bourse. These efforts should help SMEs strengthen domestic operations and expand their presence regionally, boosting macroeconomic development and stability, further supporting ongoing efforts to develop a digital economy.

Economic Significance

The government’s dedicated SME support agency, the Office of SMEs Promotion (OSMEP), reported that SMEs accounted for 41.1% of GDP in 2015, or BT5.56trn ($156.6bn), a 5.3% expansion on 2014. SMEs in the service sector accounted for 40% of total economic activity in 2015, followed by those operating in the manufacturing sector (26.9%), and trade and maintenance (15.1%). Wholesale and retail trade accounted for the vast majority of SME service activity in the trade and maintenance segment in 2015, with economic activity valued at BT1.63trn ($45.9bn), or 78.2%, according to OSMEP. Within manufacturing and export-oriented SMEs, food and beverage manufacturing accounted for 17.0% of total GDP contribution in that year, followed by SMEs in the furniture (13.0%) and chemicals (12.3%) segments.

SMEs account for the majority of businesses in the country, and in February 2017 the Bangladesh-based SME Foundation reported that 99.7% of enterprises in Thailand are SMEs, the second-highest proportion in South-east Asia after South Korea, at 99.9%. SMEs account for 80.3% of employment in Thailand, second only to South Korea’s 87.7%, and are responsible for 26.3% of export earnings, behind India (42.4%) and China (41.5%), but ahead of Sri Lanka (20%), South Korea (18.8%) and Indonesia (15.7%). Other estimates are less optimistic, with the Ministry of Commerce’s Department of International Trade Promotion (DITP) reporting in February 2017 that SMEs accounted for 20% of export earnings in Thailand.


SME lending has been on the rise, and the Bank of Thailand reported that SMEs accounted for the largest share of loans in Thailand in 2016 with 33.4%, compared to consumer lending (32.6%) and corporate lending (25.1%). However, the SME segment has also recorded the highest level of NPLs in Thailand, with SMEs’ NPL ratio rising from 3.50% in the fourth quarter of 2015 to 4.04% in the third quarter of 2016, and then to 4.35% in the fourth quarter 2016. SME loan growth simultaneously slowed from 5.6% in 2015 to just 1.8 in 2016, driven downwards by contractions in real estate and manufacturing SMEs.

This has prompted banks and government actors to diversify the financing options on offer to the segment. In January 2017, for example, Siam Commercial Bank (SCB) announced it was launching a small business lending programme, SME Ready 2 Grow, offering favourable lending terms, including a maximum loan-to-value (LTV) ratio of 150% for SME expansion or working capital support, and 100% LTV for workplace purchases. Tenors extend to a maximum of 30 years for established businesses, while business start-ups are now able to apply for 10-year loans with a 90% LTV ratio.

SCB is also offering SME operators new digital tools at certain point-of-sale terminals, an initiative that falls under government efforts to support the expansion of Thailand’s growing digital economy.

Capital Market Support

In July 2016 Krung Thai Bank (KTB), Thailand’s third-largest commercial bank by assets, announced the launch of a venture capital fund valued at BT2.3bn ($64.8m). The SME Private Equity Trust Fund, launched in partnership with the Stock Exchange of Thailand (SET) and the National Science and Technology Development Agency, aims to help SMEs and start-ups expand their businesses. The fund will be managed by Krung Thai Asset Management, a subsidiary of KTB, and One Asset Management, with KTB to contribute BT2bn ($56.3m) of the overall total and SET to provide an additional BT200m ($5.6m) in capital.

The fund targets investment in three SME categories: high-growth start-ups, technology-based SMEs and larger suppliers, with the aim of supporting healthy long-term growth and enabling businesses to eventually raise funding from the stock market. The announcement proved to be well timed, with SET officials in November 2016 announcing plans to launch an SME marketplace for start-ups and small businesses in the third quarter of 2017.

The fund, which is expected to initially support about 100 businesses, will also invest as a partner in some beneficiary SMEs. Funding will be set at between BT20m ($563,000) and BT150m ($4.2m) per business, with priority going to SMEs with annual revenues of BT400m ($11.3m) to BT600m ($16.9m).

SMEs will further benefit from financial advisory services, investment consultancy and pre-listing management for firms planning to list on the stock market, while the NSTDA will offer tax incentives to SMEs undertaking research and development (R&D) activities or technology-based businesses.

Export Promotion

In addition to new lending programmes, government agencies are offering new support mechanisms for export-oriented SMEs through training, economic stimulus packages and international trade promotion activities.

In January 2017 Thailand’s Ministry of Industry (MoI) announced plans to launch new programmes designed to support SMEs, with the ministry working in collaboration with the Ministry of Commerce (MoC) and Ministry of Science and Technology.

The ministries are currently drafting a series of stimulus packages aimed at cutting costs and boosting SME exports, while also encouraging SMEs to adopt e-commerce activities. Uttama Savanayana, the minister of industry, told local media that special attention is being paid to the Cambodia, Laos, Myanmar and Vietnam (CLMV) market, particularly given rising export demand, with Thailand recording a robust trade surplus with the CLMV region in recent years (see Trade & Investment chapter).

The MoI has also been involved in a first of its kind training programme for SMEs, the SMEs Spring Up initiative, which will help more than 100 businesses boost competitiveness. Launched in May 2016, the programme educates participating entrepreneurs on quality control, quality enhancement, innovation, R&D and leadership. Small-business management courses are also offered. In February 2017 the Department of International Trade Promotion also announced that it planned to focus its 2017 activities on SMEs in a bid to boost the segment’s share of exports from current levels of $21bn annually.

Department officials will collaborate with trade representatives and the private sector to draft plans for increasing SME exports, particularly in the CLMV market. Thailand’s trade surplus with CLMV countries rose by 4.4% in 2016 to hit a record BT439.6bn ($12.4bn), up from just BT87.2bn ($2.5bn) in 2006. There are also plans – in partnership with the MoC – to boost international trade promotion activities, with Oman, the UAE, the UK, the Philippines and Cambodia earmarked as potential target markets.

Export Lending

Support for SME exporters also extends to the banking sector, with the state-owned Export-Import Bank of Thailand (Exim Bank) announcing in February 2017 that it was rolling out a new low-interest loan scheme, complete with free credit insurance, which will target export-oriented SMEs. Borrowers are permitted loans of up to BT50m ($1.4m) through the Exim Export Credit Plus programme, which charges variable rates based on the currency used for the loan. Loans in Thai baht are charged interest rates of 4.5% during the first year, then the prime rate minus 1% during the second year. US dollar-denominated loans are charged the London Interbank Offered Rate (LIBOR) plus 3% for the first year, then LIBOR plus 3.5% during the second year. Collateral equivalent to 25% of the loan’s total value is required to secure financing.

SMEs will also benefit from lower credit insurance premiums, which generally cost between 0.5% and 2% of export values. Credit insurance provided by Exim Bank will cover 90% of exporters’ losses in the event of a buyer default, providing an important incentive for SMEs to expand into new markets. The bank expects BT35bn ($986m) in new loans in 2017, up from BT20bn ($563m) in 2016 (see Banking chapter).


With retailers comprising a large proportion of the SME segment, e-commerce adoption is seen as critical for growth, evidenced by a BT33.7m ($950,000) budgetary allocation to the MoC in 2017 to help it roll out programmes designed to help SMEs develop digital business practices.

The private sector is also moving to invest in new e-commerce platforms for SMEs, with Chinese retail giant Alibaba Group announcing in December 2016 that it had signed a cooperation agreement with Thailand’s government to develop its e-commerce landscape, a key part of the Thailand 4.0 and Digital Economy strategies (see Banking chapter).

Somkid Jatusripitak, the deputy prime minister, said the agreement marks a new chapter for public-private partnerships in Thailand, with Alibaba set to provide training and expertise to Thai government employees as the country designs and builds a national e-commerce platform. Both will also take part in a programme designed to provide training to 10,000 IT professionals and software app developers.