A one-time wellspring of capital for those seeking to expand beyond Thailand's borders, changing times have forced Exim Bank to do a bit of soul searching and redefine its mission at home and abroad.

'It is time for Exim to find a new role,' says Exim Bank president Pisit Serewiwattana.

The state-owned Export-Import Bank of Thailand was set up in 1993 to extend credit to businesses looking to expand overseas. Since that time, it has played a key role in developing the country's export sector.

The bank has survived through thick and thin but now sees its significance waning amid the rapid growth of commercial banks, says Exim Bank president Pisit Serewiwattana.

"We might have played a vital role in the past as businesses were short of funding sources, but now, whatever we do, the commercial banks can do, and they even offer our old clients attractive products," says Mr Pisit, who recently joined the bank after a two-year leadership vacuum. "It is time for Exim to find a new role."

Exim staff at the bank's head office.

Thai JBIC

Mr Pisit was appointed in June and tasked with reviving the bank for a new era.

"It is obvious that my job is not just to lead a state-owned bank in normal circumstances," he says. "It is crucial for Exim to find its own niche position, otherwise it cannot survive in a banking industry where commercial banks have a strong edge over state-owned banks."

Exim Bank's original mission was to aid Thai firms at a time when most still lacked experience in doing business abroad and commercial banks limited their services to large corporations.

After the government successfully helped pushed Thailand's exports to their peak, with gross domestic product rising to over 13 trillion baht, exporters and importers now have access to all of the facilities and competitive offers from commercial banks.

With its capital limit at just slightly above 18 billion baht, it is difficult for the state bank to keep up with its commercial rivals.

"We used to be a major financial source for exporters," he says. "Now the commercial banks can do everything and also have more capital."

Mr Pisit says there are only two areas where Exim can still flourish: as a lender for small and medium-sized enterprises (SMEs) and as a provider of credit insurance for them.

SMEs are largely unable to ship to export markets on their own. That, coupled with the fact that many of them don't stick around for long, makes them high risk, adding to the challenges of making the sector sustainable.

Exim Bank's head office on Phahonyothin Road. Set up in 1993, the state-owned bank sought to extend credit to businesses looking to expand overseas.

Moreover, if Exim becomes a lender for SMEs, its activities will ultimately overlap with those of other state-owned banks.

But Mr Pisit has bigger ideas, saying it's important that the bank serve a purpose beyond being just another state bank.

"My plan is to make Exim play a role similar to that of Japan's JBIC," he says.

JBIC (Japan Bank for International Cooperation) is a Japanese public financial institution. It was born through the merger of the Japan Export-Import Bank (Jexim) and the Overseas Economic Cooperation Fund (OECF).

Its role is mainly to promote economic cooperation between Japan and other countries by providing resources for foreign investment, fostering international commerce and promoting Japanese exports and imports as well as the country's activities overseas.

JBIC has played a significant role in developing infrastructure projects in Southeast Asian countries, including Thailand.

Exim Bank needs to find its own niche position to survive in the competitive local banking industry, Mr Pisit says.

Team Thailand

"When JBIC finances a big project overseas, it summons help from the Japanese private or public sector to support that project's development," Mr Pisit says.

Exim Bank can do the same, he adds.

"Team Thailand" can be created by pooling support from other state agencies tasked with promoting the SME sector to aid in expansion abroad, with Exim Bank acting as leader.

"We can team up in a more concrete way with public and private enterprises," Mr Pisit says.

There are various state actors that support SMEs as their key mission, including the Office of Small and Medium Enterprises Promotion, the Small and Medium Enterprise Development Bank of Thailand, various ministry bureaus such as the Commerce Ministry's Export Promotion Department, and the Foreign Affairs Ministry's representatives overseas.

They could be tasked with fostering partnerships to help expand financial facilities, Exim Bank's export credit insurance in particular, and work closely as Team Thailand.

"The bank is ready to serve as a financial mechanism to facilitate Thailand's international trade expansion for those SMEs operators who will be major drivers of exports and economic growth," Mr Pisit says, adding that other agencies can focus on the areas they are keen on.

He realises that Team Thailand won't last long if other organisations and state agencies are not committed to the mission.

Therefore, the idea must be pitched to policymakers, he says. If they buy into Exim Bank's proposal, the law can be amended to serve the mission and ensure the long-term continuity of the Thai team.

Mr Pisit gives an interview to officials from Moody's Investors Service.

Legal amendment

This change cannot occur without an amendment to the law, as Exim Bank's role has been limited under the Export-Import Bank of Thailand Act.

"We have to discuss the plan with the Finance Ministry and Deputy Prime Minister Somkid Jatusripitak," Mr Pisit says. "If they agree with our idea, then the procedure to amend the law will kick off and all these changes can be executed afterwards."

Currently, the law in question limits Exim Bank's ability to help either Thai companies or foreign companies that have used Thai materials or imported Thai products. But with the new business sphere, cross-border trade and commerce will become normal activities.

If Exim Bank is allowed to be flexible in its financial services, companies, especially those from neighbouring countries, can become borrowers and take advantage of the bank's financial services.

"By doing so, we can boost Thailand's outward direct investment in the region," Mr Pisit says. He likens the concept to that adopted by the Stock Exchange of Thailand, which looks to being a capital market for Asean business operators to mobilise funds from the public, even though they are not Thai companies.

Current Thai direct investment (TDI) outflows average 5% a year, outpacing foreign direct investment (FDI) of 2%. This signifies the increasing role of investment-induced trade overseas in driving the Thai economy and may help Thailand move out of the middle-income trap, helping it become a high income nation.

These SME fair attendees are target customers as Exim Bank strives to help small businesses expand overseas.

"Our plan is to set up representative offices in CLMV [Cambodia, Laos, Myanmar and Vietnam], with the first one, in Laos, having already been opened," Mr Pisit says. "The office in Myanmar will open in the first quarter next year and the one in Cambodia thereafter. We're starting out with representative offices because it will take some time to get licences granted by the central banks of each country."

Also, the legal amendment is essential in order to change the missions of these government banks.

"If we can do that, even if there is a change in government policy, Exim Bank's mission to be like the JBIC will continue," Mr Pisit says.

But to ensure that such changes take place on solid ground, the bank has hired Boston Consulting Group (BCG) to conduct a feasibility study.

"They have to study all areas of what we should do and what we can do," Mr Pisit says. "It must be something we are really capable of handling. Also, other key questions after we find out which role to play involve the crucial elements to help us achieve our mission and restructure the organisation. Then we need a plan of execution."

The report by BCG is scheduled to be ready by early next year.

"Once the proposal is approved by the government, BCG will draft a plan and a roadmap for us. We have to study the plan closely and report to the government," Mr Pisit says. The transition period is expected to take three years.

Exim Bank is required to discuss the issue with the Bank of Thailand as well, but Mr Pisit says the central bank's senior officials also agree with him that the change is crucial for the bank.

"They said they are waiting for us to tell them our ideas on what roles we can play. They are aware of our situation," Mr Pisit says. "It's a big thing, but we need to do it."

SME operators discuss financial aid from banks at a fair held in Bangkok.

New focus

While waiting for BCG to finish the business restructuring plan, Exim Bank has begun to step into a new area that commercial banks might overlook: export credit insurance for SMEs.

To help SME exporters and operators mitigate the risks of branching into new countries, the bank will improve its export credit insurance product and launch it by the end of this month, Mr Pisit says.

Hundreds of thousands of exporters are buying export credit insurance, a safeguard for exporters' foreign receivables against non-payment risks, to cover their 3,800 customers in total, he says, noting that the state-backed bank uses reinsurance as a form of risk management.

Exim Bank will pay compensation of 80-85% for damages incurred due to non-payment for exporters who buy export credit insurance policies.

The bank has previously paid 20% of the premium as compensation for export credit insurance, a figure that is well above the 40% offered in some countries.

People seek for knowledge to operate their own business at a SME fair.

"This is another area that commercial banks aren't interested in, because it's high risk, but it's the duty of state banks to help the public," Mr Pisit says. "Although the government seems to look at us as a lender, actually we should get into credit insurance.

"We can't compete in the lending market, so how can we beat commercial banks? After taking a look at the bank and all its limitations, I think the area we should put the most effort into is credit insurance, rather than lending."

But, he adds, the product needs to be promoted heavily because the market for insurance is still small in Thailand.

There are two types of Thai operators, according to Mr Pisit. The first is a professional company that will buy insurance wherever it ships to, knowing the value of paying for risk coverage. Then there is another one, which constitutes the vast majority. These are operators who will not pay for insurance at all, as they view insurance as unnecessary, thinking they'd prefer to take the risk. But when something actually happens, quite a few will end up bankrupt.

And while most businesses are not interested in insurance, there are other markets available.

"It is not only the small exporters that are our target," Mr Pisit says. "We can see some large corporations that have to deal with a huge number of suppliers. They can use our service because we can help scan their suppliers' credit initially. For example, PTT has more than 1,000 suppliers and clients they have to do business with, so they can use our credit insurance service, which means their clients have insurance coverage at some point."

The limited number of Exim Bank branches is an issue when it comes to expanding credit guarantee products. The solution has been to deal with other banks such as the Small and Medium Enterprise Development Bank of Thailand to offer Exim's export credit guarantee to SME customers, resulting in more channels to create awareness of new products.

With the launch of the "Instant SMEs Export Insurance" facility in mid-2016, Exim Bank recorded a boost in the number of export credit insurance customers, generating 41.7 billion baht during January-September 2016 in export and investment business turnover, of which 8.13 billion baht came from SMEs' exports, representing 19.5% of the bank's total export credit insurance business. Export credit insurance turnover is expected to gradually improve and meet the target set for the end of 2016.

"This is how Exim Bank has leveraged our strengths as an export credit insurance agency to boost Thai exporters' competitive advantage by enabling them to offer attractive payment terms and expand their markets with confidence and without concerns about foreign buyers' non-payment," Mr Pisit says.

Performance

"Actually, our balance sheet is quite clean; we are relatively strong when compared with other state banks. But if we don't do anything, in the end we might need to merge with another bank because they will see us as being useless," he warns.

At a time when there are quite a few state-owned financial institutions facing financial trouble due to myriad reasons, including mismanagement and corruption stemming from intervention by politicians, Exim Bank is relatively healthy.

Exim Bank's non-performing loan ratio at the end of September 2016 stood at 5.07%. NPLs totalled 3.7 billion baht.

The bank's allowance for doubtful accounts was 6.42 billion baht, of which 3.11 billion was taken up by the minimum provisioning requirement set by the Bank of Thailand, enabling the bank to maintain a strong financial status.

Exim Bank's operating results for the first nine months of 2016 were also satisfactory. It posted a net profit of 931 million baht and achieved its target of enhancing trade and investment competitiveness for Thai entrepreneurs, particularly SMEs.

As of the end of September 2016, the bank had outstanding loans of 74.5 billion baht, an increase of 928 million from the end of 2015. New loan draw-downs for the year came to 16 billion baht, with a partial repayment of existing loans being registered. This contributed to business turnover of 90.7 billion baht, of which 59.7 billion was for SMEs.

Outstanding SME loans amounted to 30.9 billion baht, surging 7.6 billion or 32.7% year-on-year. This was attributable to Exim Bank's strengthened collaboration with public and private enterprises and the development of new products catering to SMEs, especially small businesses that have limited access to the financial assistance programmes of commercial banks.

Exim Bank recently introduced Exim Instant Credit, a pre- and post-shipment working capital loan at an interest rate of 3.5% that only requires a personal guarantee.

Offering a credit line of up to 500,000 baht, the new facility features quick approval within seven business days and is aimed at helping boost SME exporters' liquidity as well as drive Thai export growth in the fourth quarter of 2016.

Apart from Exim Bank's mission to overhaul its business, from the fourth quarter of 2016 and throughout 2017, the bank aims to accelerate its development in the CLMV zone.

At present, the bank has approved a total of 52.4 billion baht in international trade and investment loans, with outstanding loans making up 31.6 billion as of September 2016. Exim Bank plans to open representative offices in the CLMV countries over the next few years to promote and support Thai trade and investment in the region.