Financial Access for Small and Medium Enterprises (SMEs) in the Northeastern Region

Abstract

The purpose of this research was (1) to study and analyze the characters and major factors required to access commercial banks’ credit for the Small and Medium Enterprises (SMEs) in the northeastern region in order to guide SMEs who have problems with financial access. (2) to give advice and guidance to SMEs so they have more opportunity to access a bank’s credit. The study was conducted in five provinces in the northeastern region, Nakhonratchasima, Khonkaen, Ubonratchathani, Udonthani and Roiet. Questionnaires were completed by 360 companies and interviews were conducted with executives responsible for credit of 10 branches of three commercial banks. Data were analyzed using factor analysis. The results showed that  SMEs which obtain commercial bank’s credit placed importance on seven major factors, which are in line with the interview results: (1) business environment; (2) administration and management; (3) credibility and collateral; (4) accounting and financial transactions; (5) individual factors; (6) social status and; (7) business capital structure. In addition, the results showed that SMEs facing severe problems with financial access are those of new establishments or running businesses less than three years, and micro SMEs set up in the form of small shops. However, being well prepared prior to applying for credit is something that the SME operators should take into account. They should know the credit policies of each bank relating to their businesses, pay attention to business management of both the internal and external environment, understand the goal and the business plan as well as have regular transactions on the bank statement.  Moreover, they should keep good financial records of the business, consult with Thai Credit Guarantee Corporation when having collateral problems, be well prepared concerning the commercial document system, the finance and accounting system as well as manage their capital structure appropriately.  Doing all these things is to have correct and reliable data of business status and performance, which not only brings about credit approval opportunities but also reduces tight credit conditions and obtains fair interest rates from a commercial bank. This also assists the businesses to access various promotion measures by the government.