The Thai Credit Guarantee Corporation (TCG) is preparing to provide credit guarantees for nanofinance loans to help small entrepreneurs gain greater access to formal financing.According to TCG president Sittikorn Direksoonthorn, the company plans to expand its credit guarantee services to cover nanofinance in the second half of this year. Nanofinance loans are designed for small entrepreneurs who typically require modest amounts of financing, roughly 20,000 baht per borrower.
Under the arrangement, TCG and nanofinance providers will share credit risk. For example, a nanofinance lender may absorb 80% of any loan losses, while TCG would cover the remaining 20%, he said.
Mr Sittikorn said while nanofinance lending criteria are more flexible than those of conventional financial institutions, many small entrepreneurs still cannot access these loans. TCG aims to support the sector so more small business operators can obtain financing through the formal financial system.
Nanofinance loans are designed to help entrepreneurs who previously relied on informal lenders to gain access to formal financing at lower borrowing costs. The loans carry a maximum interest rate of 33% per year and are provided without requiring collateral or a guarantor.
