THAILAND

The Finance Ministry may set up a new 7.7-billion-baht fund to finance people wanting to start a new business.

A senior ministry official who declined to be named said the government recently asked the Fiscal Policy Office to study the feasibility and legal viability of the idea.

"This is mainly to help the Pheu Thai Party fulfil a key promise of the election campaign _ to help new university graduates and others access funds to open their own businesses rather than just work as an employee," said the official.

The source said plans are for each province to have a fund of one billion baht to be accessed on a first-come first-served basis.

Loans will be provided by commercial banks but guaranteed by the state-owned Small Business Credit Guarantee Corporation (SCBG). The banks will set the lending criteria.

The source said the biggest obstacle to starting a business is a lack of seed money.

Even if people have a great idea, banks may still regard it as too risky if the borrower has no business experience in business.

"This fund, if it gains approval, would plug that loophole. Since the banks cannot take risks, the SCBG, which normally supports small businesses anyway, could help to guarantee these new businesses too," said a source.

The SCBG normally guarantees 30% of the loan amount but for this new scheme may have to cover as much as 40-60%. But the source said the government may agree to shoulder 10% of the default costs of the SCBG-backed loans.