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The year 2003 saw tremendous growth in the operational outcomes of
SME Bank, whether in terms of debt financing, equity financing, SME
counseling, or diversification of loan products and other financial
services. The expansion of services was in direct response to SMEs’
needs as well as government policy on the development of new entrepreneurs
and strategies business segments. The 2003 performance results may
be summarized as follows:
Debt Financing
IIn 2003, SME Bank approved loans to
6,179 small and medium enterprises, totaling 27,373 million baht.
Among the loan recipients, 1,402 firms or 22.6% were new firms, being
first-time listed on the commercial register in the year 2003. The
remaining 4,795 firms or 77.4% were existing firms.
In terms of business segments, 48% of
loan recipients in 2003 were from manufacturing sector, 16% from the
trading sector, and 36% were from the service sector. In terms of
location of the business premises 4,171 firms or 67% were located
in the regional areas.
SME projects approved for loans in 2003
are expected to generate 7,050 new jobs while also retaining some
54,617 existing jobs. They are expected to generate 4,900 million
baht value-added to the economy. The lending activities resulted in
SME Bank’s outstanding loans of 18,482.55 million baht and a
total of 6,671 outstanding debtors at the end of 2003.
Compared to results of the year 2002,
loan approvals increased by 45%, the number of projects approved increased
by 255%, outstanding loans increased by 63%, and outstanding debtors
increased by 248%.
In the last quarter of 2003, SME Bank
launched new financial products namely leasing and hire purchase,
bank guarantee and aval. Approvals for leasing amounted to 2.4 million
baht, and those for bank guarantee and aval totaled 98 million baht.
Factoring continued to be highly popular, as evidenced by approvals
totaling 11,497 million baht, an increase of 48.9% over the year 2002.
Equity Financing
In 2003, SME Bank approved equity participation
in 28 small and medium enterprises totaling 543.21 million baht, an
increase of 120% over approvals in 2002. Out of the combined 2,180.16
million baht registered capital, SME Bank has paid up 305.69 million
baht in equity shares.
One of the ventures in which SME Bank
participated is the "Thai Automotive VCF Co., Ltd.", a venture
capital firm focusing on investing in the automotive parts industry,
which is a national strategic business cluster. SME Bank invested
50 million baht in the joint venture with JAIC Asia Capital PTE Limited
of Japan, V-Net Capital Limited and Sumitomo Corporation.
SME Development
In 2003, SME Bank provided business
counseling and training to 1,059 SMEs, including the Bank's loan clients
and other interested SMEs. Out of these, 144 firms received in-depth
consultation to resolve their specific problems and further develop
their businesses, as provided under the government-funded "Invigorating
Thai Business - ITB" program. Other counseling services included
on-site "business diagnosis" to identify the firm's SWOT
and business potentials, with initial advice, and "business clinic"
where questions were received and preliminary advice given via phone,
fax, letter or e-mail.
SME Bank has been providing training
for "Business Successors" under the Ministry
of Industry's New Entrepreneur Creation (NEC) program. The training
facilitated business owners and their intended successors to jointly
craft their business strategies and business plans, in preparation
for investments and loan applications to financial institutions. In
2003, fourteen classes of the 12-day training course were organized
in 14 provinces, where a total of 441 firms completed the course.
In addition, a 2-day practical training course on "Accounting
System and Accounting Software Application" was given,
together with free software, to 493 SME trainees in 9 classes.
Furthermore, an electronic library for
SME investment was developed under the Bank's "Takkasila"
project. The e-library is available on CD-ROM for off-line use. It
is also installed in search stations, which were set up and piloted
at 8 branch offices in the provinces of Chiang Mai, Phitsanulok, Khon
Kaen, Nakhon Ratchasima, Suphanburi, Chonburi, Surat Thani, Songkhla,
and on Si-Ayutthaya Road.
Financial Performance
SME Bank's total assets stood at 21,498.07
million baht as of 31 December 2003, increased from that at the end
of 2002 by 74%. Total liabilities were 18,149.42 million baht, increased
by 98% from the previous year. Shareholders' equity was at 3,155.10
million baht, an increased from that of the year 2002 by 6.3%. Capital
adequacy (BIS) ratio as at 17.41% at year-end.
In 2003, SME Bank earned a net income
of 1,106.85 million baht, 68% higher that net income in 2002. Net
profits amounted to 187.78 million baht, 124% increase over that of
the year 2002. Net profit per share was 6.71 baht, higher than the
2.99 baht per share for 2002.
Interest income for 2003 was 1,005.80
million baht, 69% higher that that of the year 2002. However, there
was a loss from equity investments of 41 million baht. In addition,
a full 100% reserve of 129.83 million baht for doubtful accounts was
set aside in accordance with the criteria of the Bank of Thailand.
In 2003, SME Bank incurred borrowing
expenses of 242.60 million baht, increased from that of the year 2002
by 69%. The major reason for increased borrowing was the significant
growth in loan provision. The total borrowing of 17,853 million baht
included 5,000 million baht in 5-year unsecured debenture with fixed
coupon rate of 2.20% per annum, which was offered on July 22, 2003.
Operating expenses in 2003 amounted
to 546.64 million baht, increased from that of the year 2002 by 56%.
The increase was attributed to the substantial growth in loan provision,
venture capital provision, SME counseling and training services, the
opening of 21 new branch offices, and the relocation and renovation
of 23 existing branch offices. The increase in number of employees
and corresponding increase in work activities also led to significant
increase in related expense items.
NPL Management
At the end of the year 2003, SME Bank
had non-performing loans totaling 3,877 million baht, increased from
1,689 million baht as at the end of 2002. The ratio of NPL to outstanding
loans at the end of 2003 was at 20.97%, increased from 19.34% for
2002.
The relatively high level of NPL was
a result of accumulation since 1964, under the portfolio of then Small
Industries Finance Office and later transferred to the Small Industry
Finance Corporation. No bad debts have ever been off-loaded to other
asset management companies. In addition, 40% of the NPL arose from
loans provided during financial crisis years (1997-2001) in support
of the government policy to resolve liquidity problems in the financial
system.
Nonetheless, most of SME Bank's NPL
are covered, and reserve for doubtful and bad debts stood at only
2.46% of outstanding loans. In the year 2003, the Bank established
an NPL Follow-up Committee, who was able to resolve 1,056 million
baht of NPL.
Productivity Improvement
A Productivity Improvement Plan for
2003 was implemented with the principal objective to standardize and
expedite operations and services, while providing flexibility and
transparency under the principles of good governance, and ensuring
that employees possess the skills and knowledge needed in their duties.
To this end, the Bank undertook the following initiatives:
Enhancing efficiency of loan
approval process by improving workflows, issuing clear regulations,
executive orders, and operating manuals. Checklists were deployed
for screening of loan applications. Documents used in loan appraisal
process were made more concise. Average time for loan approval was
reduced to 30 days. Loan disbursement rate against credit approval
in 2003 increased to 67%.
Human Resource Development
with 51 classes held in 21 training courses. Attendance totaled 1,999
counts. Six meetings and workshops were organized, including the Annual
Employees' Meeting, for dissemination of Bank's policy and participative
development of the 2004 operating plan. Eight members of the Bank's
Management made study visits to development financial institutions
in Germany and Japan. In addition, a searchable e-library for management
and planning was developed under the "Takkasila" project,
and distributed to all top and mid-level management staff to utilize
in their planning, policy analysis, business analysis, SME counseling
activities.
Development of Risk Management
System with improvements of tools for credit-risk analysis,
such as the Credit Risk Rating and Credit Scoring systems, establishment
of the Risk Management Committee, and publication and distribution
of self-study risk management manual to the Bank's employees.
Asset Quality Management
by close and continuous monitoring and resolution of NPL, allocating
the NPL portfolio by clusters, and implementing an internal reporting
system as warning signs to the responsible departments.
Expansion of Branch Network
In 2003, twenty-one new branch offices
were opened. 21 existing branch offices were relocated, and 2 branch
offices were renovated. Six branch offices were opened in December
2003 namely Samut Prakan, Aom Noi, Lop Buri, Sing Buri, Nan, and Sa
Kaew. At the end of the year 2003, 65 branch offices were in operation.
| Region |
Number of
branch offices
operational in 2002
|
Number of
branch offices
opened in 2003
|
Total |
| 1. Greater Bangkok |
3 |
5 |
8 |
| 2. North |
10 |
4 |
14 |
| 3. Northeast |
9 |
6 |
15 |
| 4. Central and East |
13 |
4 |
17 |
| 5. South |
9 |
2 |
11 |
| Total |
44 |
21 |
65 |
Loan Schemes Aligned with Government Policies
In 2003, SME Bank initiated a number
of loan schemes in line with various government policies. These schemes
include both unilateral and multilateral operations, as follows:
Loan for Tourism Industry
affected by the outbreak of Severe Acute Respiratory Syndrome (SARS).
Loan with special interest rate of 6% per year for the first two years
were made available to members of those tourism associations which
had signed agreements with SME Bank, with guarantee by their association
or fellow members. A total of 173 million baht of this loan were approved
to 85 borrowers.
Fast Track Loan was
launched in May 2003 to promote grassroots businesses and new entrepreneurs
who need capital of not over 500,000 baht and have no collateral.
The loan approval process is shorter than for regular loans. In the
year 2003, Fast Track loans totaling 779 million baht were approved
for 4,033 borrowers. Out of these, 1,214 borrowers were new entrepreneurs
who received a combined 513.93 million baht in loan.
Financial Corporation For the
Development of Grassroots Economy in cooperation with the
Bank for Agriculture and Agricultural Cooperatives (BAAC) and the
Government Savings Bank (GSB) to support inter-related businesses
along value-chains, encompassing farmers, community enterprises, processing
industries, wholesalers and retailers. The tri-partite scheme has
provided support to 179 projects involving 5,475 entrepreneurs with
loans totaling 612 million baht. Of these, 340.6 million baht in loan
were provided by SME Bank to 89 projects involving 284 entrepreneurs.
Loan for Thai Workers Going
Abroad in cooperation with Thailand Overseas Employment Administration.
Concessionary collateral arrangements are given upon both regular
loans (of up to 100 million baht per borrower) and Fast Track loans
(of 50,000-1,000,000 million baht per borrower.) The project was started
in October 2003.
Assets Capitalization Loan Scheme
in cooperation with the Department of Intellectual Property, the Assets
Capitalization Bureau, and other agencies designated by the government.
Under the scheme, SME bank shall accept intellectual properties as
collateral for loans of 50,000-5,000,000 baht per borrower. The scheme
was started in October 2003.
Exporters' Loan in
cooperation with Thai Toy Industry Association, Thai Gifts and Premiums
Association, Thai Housewares Trade Association, Northern Handicrafts
Manufacturers and Exporters Association, and Design & Objects
Association. Packing credit of up to 3 million baht per borrower is
provided, as well as fast loan of up to 1 million baht per borrower
for participation in trade exhibitions and sale activities in foreign
markets. The scheme was started in August 2003.
"Thai Cuisine to the World"
Loan Scheme in cooperation with the Department of Export
Promotion, Ministry of Commerce, the Ministry of Foreign Affairs,
the Office of Small and Medium Enterprises Promotion, the National
Food Institute and universities. The scheme is open to businesses
in the food cluster, including food processors, OTOP producers, exporters,
importers, wholesalers, retailers, as well as Thai restaurants located
in foreign countries. Maximum loan amount for each borrower is 100
million baht. The scheme was launched in October 2003.
Public Relations and Marketing Campaigns
Throughout the year 2003, SME Bank conducted
aggressive public relation and marketing campaigns in an attempt to
expand the Bank's customer base aiming at SMEs throughout the country.
Continuing public relation campaigns via the mass media all through
the year resulted in a wide recognition of the Bank's reputation and
image. A clear evidence is the number of calls received by the Bank's
Call Center 1357, which increased from 34,299 calls in the year 2002
to 60,104 calls in the year 2003, a 75.24% growth resulting from constant
PR and marketing campaigns reaching target groups both directly and
indirectly, as well as increased collaboration with domestic and foreign
public and private-sector organizations. Such collaboration was exemplified
by the launch of the "Fulfill & Farewell" loan scheme
for early-retired government employees, "Thai Cuisine to the
World" scheme for Thai restaurant operators, financial assistance
to the tourism industry affected by the SARS crisis, assistance to
SME entrepreneurs affected by the outbreak of Bird Flu, to name a
few. Furthermore, the Bank launched new services to better cater to
the needs of SME entrepreneurs, such as leasing and hire purchase,
bank guarantee, aval, loan for participation in trade exhibitions
overseas, and packing credit for exporters. In cooperation with the
government, SME Bank participated in the Assets Capitalization initiative.
Under cooperation between SME Bank and the Department of Intellectual
Properties, SME entrepreneurs may utilize such assets as copyrights,
patents, petty patents, or trademarks by transforming them into capital
for establishment or expansion of their businesses or working capital.
SME Bank also cooperates with the Department of Industrial Works to
collateralize machinery, and with the National Housing Authority to
collateralize rental rights for loan applications.
In addition to public relation campaigns
throughout the year 2003, SME Bank also ran advertisements to communicate
its commitment to serve SME entrepreneurs more effectively. SME Bank's
ads "Our Umbrella Always Be There", which
ran from August through December 2003, clearly signified the Bank's
standpoint to always provide shelter and comfort to our customers,
come rain or shine. The campaign was received warmly, and generated
wide recognition of the Bank's reputation. In addition, starting from
the end of 2003 and continuing into 2004, SME Bank launched a second
campaign, "SME BANK helps Thai SMEs Build the Nation."
The ad for the campaign featured tiny ants working in unison through
all circumstances, as a metaphor for the united force of millions
of SMEs building the Thai economy, with SME Bank ready to support
them to achieve their goals. The campaign touched the hearts of many
SME entrepreneurs. Apart from advertisement, SME Bank also reached
target groups both in Bangkok and other provinces with the Bank's
presence in about 90 exhibitions throughout the year.
From a marketing perspective, SME Bank
conducted various activities to reach out to prospective customers,
while maintaining relations with existing customers. The Bank organized
9 classes in Business Plan Writing in which about 350 prospective
new entrepreneurs attended free of charge.
Under the "Marketing Arms"
program, SME Bank offered opportunities for customers to access, free
of charge, the Bank's public relations channels, including publications,
radio and television broadcasts, SME Bank's website, and exhibition
of their merchandise at SME Bank's booth at various events throughout
the country.
To promote corporate image in terms
of good governance, SME Bank initiated the "White Bank"
project by establishing P.O. Box 1313 as the first-time-ever direct
channel through which customers could file complaints and suggestions.
The Bank's President opened and read all letters personally, and took
action immediately.
SME Bank's dedicated service aimed at
assisting and developing SME entrepreneurs, and close and compassionate
counseling by Bank's staff, resulted in excellent customers' good
will and satisfaction. A customer satisfaction survey by Rajabhat
Institute, commissioned by the Bank, revealed that SME Bank's services
in 2003 were rated "highly satisfactory" with a score of
4.02 out of the maximum possible score of 5. The highest rated item
was satisfaction with staff's service.
With achievements in the year 2003,
SME Bank is proud to be the driving force in the promotion and development
of Thai SMEs towards sustainable growth, in accordance with the objectives
for establishment of SME Bank. As a principal agency bringing government
assistance to SME entrepreneurs throughout the country, SME Bank's
vision and mission shall always remain the dedication to promote and
propel Thai SME entrepreneurs towards the global marketplace, and
the driving force for sustainable growth of the Thai ecomomy.
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