Thai Central Bank Chair Urges Lending Reform as SME Credit Shrinks for Nearly 17 Quarters

Productive small businesses struggle to get bank loans

Thailand's commercial bank lending to small and medium enterprises has contracted for nearly 17 consecutive quarters, Bank of Thailand board chairman Somchai Sujjapongse said on November 14, 2026, as he called for closer checks on rejected loan applications and a broader review of banking laws.

His warning comes alongside research showing that even among businesses ranked in the top 30% for efficiency, only about 20% of small and medium enterprises, or SMEs, had commercial bank loans. More than 60% of similarly efficient large companies had access to them.

The Puey Ungphakorn Institute for Economic Research, known as PIER, published its capital allocation study on August 21, 2026. It combined corporate financial statements covering 1999 to 2024 with individual loan records reported to the central bank. Its central finding is that money is often failing to reach businesses that could use it most productively.

Somchai urged Governor Vitai Ratanakorn to address lending practices, delays in financial data projects and stalled legal changes. He gave the governor a passing assessment for his work in general, recognising clearer communication and attention to economic growth, while criticising progress on those three fronts.

The stakes extend far beyond bank balance sheets. A 2026 report by the Office of Small and Medium Enterprises Promotion, cited by PIER, counted more than three million SMEs employing 13.6 million people in 2025. For a productive business, difficulty obtaining affordable finance can limit its ability to buy equipment, carry stock or expand employment.

Where business lending is concentrated

PIER's figures for 2025 show that more than 75% of commercial bank business lending went to about 15,000 large companies. Approximately 110,000 SMEs shared the remaining quarter.

Within the lending to large companies, roughly two fifths went to 25 major corporate networks known as SiCorp, comprising about 1,000 businesses. The two fifths figure refers to the large company lending pool. With that pool accounting for roughly three quarters of business loans, the networks held approximately 30% of total business lending.

Large borrowers in these networks were generally established businesses operating for around 20 years, with interest rates of about 3% to 4%. SME borrowers were younger, averaging no more than 15 years in operation, and faced a typical rate around 6% in the broader lending data.

Thailand relies heavily on banks to direct money from savers to businesses. PIER found that institutional lending accounted for more than half of formal external business financing, measured across loans, bonds and equity. That calculation excludes informal borrowing and money generated inside businesses.

Access remains limited even for efficient firms

More than 80% of approximately 700,000 companies in PIER's 2024 corporate database had no recorded commercial bank loans. Some businesses finance themselves without borrowing, while others face obstacles obtaining bank credit.

PIER examined access more closely by comparing businesses with similar efficiency. Among the top 30%, about one SME in five had a bank loan, against more than three large companies in five. Large companies were therefore more than three times as likely to have access within that group.

The study measured access using outstanding commercial bank borrowing of at least 10,000 baht. Its efficiency measure examined how much revenue businesses generated from their assets, such as buildings, machinery and inventories.

The approximately 700,000 registered companies in the research database form a narrower population than Thailand's more than three million SMEs. The loan access findings apply to the companies studied, while the national SME figures capture a wider business community.

Why smaller borrowers pay more

Small businesses in the highly efficient group faced interest rates of about 7.8%, compared with 3.9% for large companies. That is a gap of 3.9 percentage points, with the smaller borrowers paying twice the rate.

Credit risk explains part of the difference. At the end of 2025, the SME ratio of nonperforming loans was about 9.0%, against 1.3% for large businesses. Nonperforming loans are debts on which borrowers have fallen seriously behind with payments or repayment has become doubtful.

PIER also used a model to account for borrower risk and business characteristics, including default risk, profitability, income, collateral and business age. Smaller and medium businesses still paid rates above the model's predictions, while large companies and SiCorp borrowers paid below them.

The model left some bank operating costs and lending strategies outside its calculations. Its results identify a pricing gap that deserves examination, with both borrower risk and the cost of providing loans relevant to the assessment.

The 7.8% figure applies to small businesses within the highly efficient group. The broader SME lending figures showed a typical rate around 6%. Keeping those populations separate helps explain why a single interest rate cannot describe every SME borrower.

Assets are generating less revenue

PIER's research connects the credit problem to a wider decline in how effectively Thai businesses use their resources. Between 2013 and 2024, revenue generated by each baht of assets fell from 1.24 baht to 0.88 baht, a decline of about 29%.

Return on assets, which measures operating profit relative to the assets used, dropped from 8.3% to 6.3%. Profit margins moved in the opposite direction, rising from 6.7% to 7.1%.

A business can keep more profit from each sale while producing fewer sales from its machinery, buildings and other assets. That combination helps explain how profit margins rose while returns on the resources invested fell.

The pattern appeared across manufacturing, traditional services, modern services and property. In modern services, including information technology and professional activities, revenue per baht of assets fell from 0.72 baht to 0.40 baht. Manufacturing fell from 1.54 baht to 1.20 baht.

Thailand's average economic growth also slowed across the periods examined by PIER: from 5.3% in 2000 to 2007, to 3.7% in 2010 to 2019, and 2.4% in 2021 to 2025. The business financial statements used in the study run through 2024.

Money is moving toward weaker users of capital

PIER separated the decline in asset efficiency into changes inside existing businesses, movement of resources between companies, and the effects of businesses entering or leaving the market. It used a method developed by economists Zvi Griliches and Haim Regev in 1995.

Existing companies becoming less efficient contributed the largest negative component, at minus 0.20. New entrants contributed minus 0.11, while the movement of resources between businesses contributed minus 0.05 over 2013 to 2024. These figures describe components of the change in the study's asset turnover measure, rather than changes in GDP growth.

Businesses whose efficiency declined were still able to expand their assets, while businesses becoming more efficient often grew slowly or contracted. In plain terms, additional money and equipment were not consistently moving toward the companies that generated more revenue from them.

PIER describes this as capital misallocation. Its findings point to two problems operating together: companies need to use their existing assets better, and the financial system needs to direct new resources more effectively. Improving credit access addresses the second problem, while business capability remains part of the first.

Somchai wants banks to explain rejected applications

Somchai proposed random, detailed inspections of rejected SME applications at banks with unusually high refusal rates. He questioned lengthy assessments, conditions exceeding borrower risk and policies excluding whole business sectors even when individual firms had potential.

He acknowledged that SMEs can carry higher credit risks, have weak productivity and lack the financial information banks need. His proposed response was to assess businesses more closely, including their ability to generate cash, while maintaining loan quality and protecting depositors.

Your Data, also called Open Data, Data Bureau and SME Credit Portal had yet to deliver concrete results, in his assessment. He described SME Credit Boost and Secure+ as necessary tools, but said the wider contraction in SME lending still needed to be addressed.

Somchai also proposed considering additional costs for banks placing surplus cash in the central bank's repurchase, or repo, market. Repo transactions exchange cash against securities with an agreement to reverse the transaction later. His proposal would change the financial incentive for banks using that market instead of expanding business lending.

Legal reform brings an argument over authority

Somchai said the board requested a legal review in June 2025, shortly after he became chairman on June 2. The review covered the Bank of Thailand Act, the Financial Institution Business Act and the Currency Act. By November 2026, he said management had proposed changing only one section of the Financial Institution Business Act.

The internal review concluded that broader amendments were unnecessary. Somchai criticised both the process and management concerns about political pressure if legislation went to parliament. He wanted the Finance Ministry, Office of the Council of State, National Economic and Social Development Council, businesses and other affected groups involved in the review.

The disagreement also touches the balance between board oversight and the governor's independence. Section 25 of the Bank of Thailand Act provides for assessment of the central bank's performance and the governor's general performance. Section 28/15 sets out routes for the governor to leave office, including Cabinet action in cases involving serious failure of duty or incapacity.

Somchai has said he wants performance indicators and examination of the meaning of incapacity, rather than extra board powers to dismiss the governor. The bank's 2008 legal changes strengthened protections for independence after an earlier era of political conflict, including the Cabinet's removal of Governor M.R. Chatu Mongol Sonakul on May 29, 2001, and appointment of M.R. Pridiyathorn Devakula.

Somchai also acknowledged that his chairmanship gives him no authority to set policy in the Monetary Policy Committee, Financial Institutions Policy Committee or Payment Systems Committee. All three are chaired by the governor, and his recommendations are not binding on them.

Five changes proposed for business finance

PIER's proposed reforms address both access to loans and the way banks price them. Better information would help lenders judge firms with limited conventional financial records, while guarantees would share some of the risk of lending.

• Combine credit records, alternative data and verified trading information to assess borrowers more fully.
• Develop government or trading partner guarantees with charges reflecting borrower risk.
• Set interest rates according to the risks of individual borrowers.
• Expand competition and financing choices for SMEs and new businesses.
• Monitor unusually low lending rates that could allow financial weaknesses to accumulate.

Somchai called for cooperation across the finance, industry and commerce ministries, commercial banks, specialised financial institutions, the Thai Credit Guarantee Corporation and business support agencies. Securities regulators and the Stock Exchange of Thailand would also have a role in widening financing choices.

The proposed changes link the immediate lending squeeze to the longer problem identified by PIER. More detailed borrower information, guarantees and competitive financing could help viable firms obtain funding while giving lenders better tools to manage repayment risk.

Policy results face closer scrutiny

Somchai also questioned how the central bank measured results from measures targeting illicit funds. On October 29, 2026, the bank reported that the value of cash withdrawals covered by its measures had fallen by more than 57% compared with January, while relevant physical gold withdrawal transactions fell by more than 85%.

He asked whether activity below reporting thresholds had increased as people split larger transactions into smaller amounts, a practice known as structuring. He called for information covering that activity as well. The gold figure also needs clarification on whether it measures transaction numbers, weight or value.

Several dates mark the development of the broader dispute:

• June 2, 2025: Somchai became Bank of Thailand board chairman.
• June 2025: The board requested a review of laws under the central bank's responsibility.
• August 21, 2026: PIER published its research on capital allocation.
• October 29, 2026: The central bank presented the cash and gold transaction figures.
• November 14, 2026: Somchai publicly reviewed his tenure and urged stronger action.

Somchai pledged another progress review after completing two years as chairman, which falls in June 2027. No timetable was given for the broader legal changes or his proposed inspections of rejected SME loans.

Key Points

• Somchai said commercial bank lending to SMEs had contracted for nearly 17 consecutive quarters.
• Only about 20% of highly efficient SMEs had bank loans, compared with more than 60% of comparable large companies.
• Large companies received more than 75% of business lending in 2025; about 110,000 SMEs shared roughly 25%.
• Highly efficient small businesses faced rates around 7.8%, against 3.9% for large companies.
• PIER found declining asset efficiency alongside lending and pricing patterns that restricted productive firms.
• Somchai proposed closer lending inspections, broader legal review and cooperation across public and private institutions.