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1 Dec 2023

Econ Digest

Micro and super micro businesses debt… is still a concern even though the economy is gradually recovering


        According to KResearch’s analysis of commercial debt account data of the National Credit Bureau (NCB), the recovery of micro businesses (outstanding loan of THB5-20 million) and super micro businesses (outstanding loan not exceeding THB5 million) remains uneven, adversely affecting their debt repayment ability. As evidenced, the share of outstanding debt – both non-performing loans (NPLs) and near-to-NPLs that are 61-90 days overdue – is likely to increase.

        Nevertheless, most debt incurred by micro and super micro businesses consists of long-term loans, either commercial loans or general loans, and auto hire-purchase loans. This indicates that micro and super micro businesses cannot generate sufficient income and cashflow for their debt repayment. As the support measures for debtors affected by the pandemic gradually wind down, offering assistance to borrowers through debt restructuring remains a challenge for financial institutions as their operations must be undertaken in accordance with the Bank of Thailand’s policy guidelines regarding debt restructuring.

Micro and super micro businesses that rely on domestic demand remain vulnerable groups and have so far been unable to resume normal debt servicing. This is particularly true for those in four categories of industries, namely construction, transportation and storage, manufacturing, as well as wholesale and retail trade, and automobiles and motorcycle repair. However, micro and super micro businesses in the tourism industry, especially hotels and restaurants, have shown clearer signs of recovery, as they benefit from the gradual tourism rebound on a larger scale. Such circumstances indicate that the recovery remains uneven across sectors.

        Looking into NPLs, KResearch projects that non-performing loans to total loans (NPL ratio) in the commercial banking system will stand at around 2.62-2.65% at the end of 2023, down from 2.77% reported for the end of 2022. However, focus must remain on debt repayment capability among small and medium-sized enterprises (SMEs), as well as micro and super micro businesses.

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Econ Digest