Thailand's small and medium-sized enterprises (SMEs) are quietly suffering through a credit crunch with far-reaching implications. Despite accounting for over 90% of registered businesses, SMEs are finding it harder than ever to access capital. The economic recovery has been uneven, and traditional lenders -- still cautious after the pandemic -- are reducing risk exposure. But the core issue is not merely liquidity; it is the absence of a national system for reviving viable but stressed firms.
Bank of Thailand data highlights a growing credit squeeze for Thai SMEs: Loan growth has turned negative over the past three years, while overall credit has grown steadily. In particular, the sector's hospitality segment was hit hard, with its credit dropping by more than 20%. Moreover, SMEs' NPL ratio remains elevated at 7.4%, far higher than the 2.8% national average in Q1 2025, and capital markets offer little in the way of alternative solutions.
Meanwhile, corporate bond issuance has declined by 22.1% since 2022 and has struggled to recover. These symptoms suggest a deeper structural fault line -- one that impedes Thailand's ability to rehabilitate distressed enterprises before they collapse.
Thailand's existing financial infrastructure was not designed specifically for widespread SME restructuring. The 1998 Asset Management Company (AMC) Act, introduced during the Asian financial crisis, allowed failed banks to clear toxic assets from the formal banking sector. However, the legislation was designed for systemic bank failures and asset fire sales, not targeted corporate revivals. Today's environment requires an entirely different toolkit.
In Thailand, viable distressed companies have limited access to debt restructuring pathways. There are no mechanisms for debtor-in-possession (DIP) financing to support these firms during reorganisation. Court-led workouts are legalistic, slow, and heavily reliant on creditor-driven processes that often prolong distress and destroy value. There are few structured SME rescue programmes and rare institutional bridges between struggling firms and new capital. In short, Thailand falls short of what Japan, Korea, and other advanced economies built after their own crises: a scalable system for mid-sized corporate revival. The Industrial Revitalization Corporation of Japan (IRCJ), created in the aftermath of Japan's banking crisis, offers a precedent. It played a pivotal role in turning around iconic companies like Japan Airlines and Renesas. The IRCJ succeeded by blending financial tools with operational restructuring, mobilising private capital while coordinating among stakeholders.
Thailand, by contrast, has seen only patchy attempts at private credit and distressed investing. Non-bank lenders, fintech platforms, and distressed asset managers are emerging, but their role remains limited. As a former CFO, I've observed that while some of these financing channels can provide flexible capital, they are often constrained by size, regulation, and unclear legal frameworks. Many operate in narrow niches -- digital micro-lending, unsecured retail portfolios, or high-yield special situations -- that do not align with the crucial needs of viable mid-sized businesses seeking support to return to a growth trajectory.
High-profile cases like Thai Airways have drawn public attention to corporate distress, but they also reveal deeper inefficiencies, such as legal protraction. For Thailand's broader SME sector, such high-stakes, court-driven processes are neither accessible nor replicable. Without early intervention and rehabilitation tools, many promising SMEs risk being pushed into a corner. The solution requires bold policy reform.
First, Thailand must invest in education to build a cadre of local turnaround practitioners who not only understand finance and accounting but also execute operational improvement with change management. These professionals are essential for diagnosing root problems, coordinating with creditors, and designing viable business plans.
Second, the country needs a modern resolution platform capable of aggregating distressed assets, facilitating recapitalisation, and bridging capital to troubled firms. Third, a dedicated public institution akin to Japan's IRCJ should be established to oversee complex turnarounds with strategic economic relevance. This body could also catalyse private sector participation while maintaining discipline and accountability.
Transforming distressed SMEs into productive economic contributors goes beyond financial engineering. It's about restoring business confidence, preserving jobs, and ensuring that Thailand's industrial base can adapt to global economic shifts. With the right tools and policies in place, Thailand could not only mitigate today's credit crunch but also lay the foundation for long-term competitiveness.
What is at stake is not just a set of balance sheets, but the very fabric of Thailand's entrepreneurial economy. The time to build this economic transformation is now -- before the next downturn exposes the cost of inaction.
Provided by SyndiGate Media Inc. (Syndigate.info).