The Finance Ministry and Bank of Thailand are pushing for the National Credit Guarantee Agency Act (NaCGA) to enhance SME access to finance and modernise state-backed credit guarantee mechanisms.

The Finance Ministry and Bank of Thailand (BoT) are jointly driving forward the draft National Credit Guarantee Agency Act (NaCGA) to address financing barriers faced by small and medium-sized enterprises (SMEs) and improve the efficiency and sustainability of state-backed credit guarantees.

According to a government source, the Fiscal Policy Office (FPO) and the BoT have completed a draft bill in line with the Cabinet resolution on August 13 2024 approving the establishment of NaCGA.

The agency aims to enhance credit guarantee mechanisms, ensure fiscal sustainability, and facilitate access to diverse financial sources for SMEs and micro-entrepreneurs through risk-based pricing.

Currently, Thailand has about 3.2 million SMEs, contributing around 35% of GDP. However, more than 40% of these businesses still struggle to access formal credit due to insufficient collateral, unstable income, and limited credit history. Many are forced to rely on informal lending instead.

While Thailand already operates state-backed credit guarantee schemes, the current structure remains limited in scope and cannot fully meet the diverse needs of businesses.

Key features of the draft law

The bill establishes NaCGA as a new institution to enhance the country’s credit guarantee framework. It outlines NaCGA’s objectives, authority, organisational structure, management system, and the transition process from the Thai Credit Guarantee Corporation (TCG) to the new agency. The draft law comprises eight chapters and 132 sections.

Under the bill, NaCGA will receive an initial capital injection from the government and loans from TCG, with the state contributing at least 10 billion baht in additional funding. Within 360 days of the law’s enactment, TCG must compensate its minority shareholders and transfer all assets, liabilities, and obligations to NaCGA.

Subsequently, the Finance Ministry will transfer its shareholdings in TCG to NaCGA, which will take over all operations. TCG employees will be absorbed into NaCGA with equal or improved compensation and continuous recognition of their years of service.

During the transition period, TCG’s general manager will temporarily serve as NaCGA’s director until a permanent appointment is made within 270 days.