Government endorses legislation for the formation of NaCGA, aimed at enhancing small-scale business financing
The Thai Cabinet has approved a draft National Credit Guarantee Agency (NaCGA) Act, marking a significant step towards improving the financial infrastructure for small and medium-sized enterprises (SMEs) in Thailand. This new state agency will operate as an entity responsible for facilitating loans for SMEs, providing credit guarantees, and assessing risk.
The role of the NaCGA is multifaceted. Acting as a guarantor for SME loans, it aims to mitigate lenders' credit risk, thereby enabling SMEs to secure bank loans and other financing more easily. The agency also supports financial institutions in lending to SMEs who may otherwise face difficulties due to insufficient collateral or credit history. In addition, the NaCGA will enhance the overall credit environment to promote SME growth and economic development.
Regarding its funding structure, while specific details about NaCGA's funding for Thailand were not found in recent search results, credit guarantee agencies of this type typically receive initial capitalization from the government, income from guarantee fees paid by lending institutions or SMEs, potential support from development partners or international financial institutions, and reinsurance or risk-sharing arrangements to manage guarantee exposure and maintain sustainability.
By reducing lending risk through guarantees, the NaCGA aims to increase SME access to formal financing. This, in turn, facilitates SME growth and competitiveness, encourages banks to extend more loans to SMEs, and helps SMEs invest in expansion, technology upgrades, and other productivity-enhancing activities.
This model corresponds with common credit guarantee schemes globally and is aligned with Thailand’s broader policy goals to strengthen regional development and SME support, as part of government efforts coordinated by entities like the National Economic and Social Development Council (NESDC).
The establishment of the NaCGA is not only a local development but also a regional trend. Similar agencies in ASEAN mobilize public and private financing by mitigating credit risks for SMEs and other underserved borrowers, often integrating capacity building and ESG considerations to improve financial inclusion and sustainable development.
Once operational, borrowers can present a "credit guarantee certificate" to commercial banks, state-owned specialised financial institutions, and non-bank lenders. This certificate will serve as a guarantee that the NaCGA will cover any potential loan defaults, thereby reducing lending risks and encouraging increased lending to SMEs.
In summary, the NaCGA in Thailand provides credit guarantees to SMEs to improve their access to finance, reduces lending risks, motivating financial institutions to increase SME lending, and supports national economic development goals by enabling SME growth through better financial inclusion. For precise, current operational and funding details, direct sources from Thailand’s Ministry of Finance or NaCGA’s official publications would be needed.
