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Gaining from Digital Disruption: the Thai Financial Landscape in the Digital Era

Author

Listed:
  • Thammarak Moenjak
  • Vorapat Praneeprachachon
  • Tanatas Bumpenboon
  • Pornchanok Bumrungruan
  • Chompoonoot Monchaitrakul

Abstract

This paper examines competitiveness of the Thai financial sector through the dimensions of depth, access, efficiency, and stability, as compared to peers. The paper finds that while the Thai financial sector compares reasonably well with peers in most dimensions, it does not fare well in term of SME access to bank credit. Using Panzar-Rosse H-Statistic, the paper also examines competition in the Thai banking sector and finds that the level of competition in the Thai banking sector is consistently high over the sample period. The results raise the question: Why does SME access to bank credit remain low, despite high level of competition in the banking sector? This puzzle is important since SMEs are a key driver of the Thai economy. Reviewing results from various studies and interviews with SMEs and bank credit officers, the paper identifies several bottlenecks in the SME lending process that may lead to market failures. Using data from 1.29 million individual SME loan contracts obtained from 15 Thai commercial banks, and six Specialized Financial Institutions (SFIs), the paper finds that only a few banks attempt to penetrate SMEs at the lower tiers of loan size and income. Although SME lending by SFIs are found to be a good complement to SME lending by banks, the fact remains that fewer than half of SMEs in Thailand have loans from these financial institutions. The paper then discusses how several initiatives have been attempted to harness the power of technology and data to help improve SME access to finance, whether from traditional banks or other types of players. Lessons from the case of SME financing and from other segments of financial sectors in selected countries are then drawn into common themes that might help guide the design of financial landscape in the digital era.

Suggested Citation

  • Thammarak Moenjak & Vorapat Praneeprachachon & Tanatas Bumpenboon & Pornchanok Bumrungruan & Chompoonoot Monchaitrakul, 2019. "Gaining from Digital Disruption: the Thai Financial Landscape in the Digital Era," PIER Discussion Papers 120, Puey Ungphakorn Institute for Economic Research.
    • Handle: RePEc:pui:dpaper:120
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    References listed on IDEAS

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    Cited by:

    1. Thitima Chucherd & Chanokkarn Mek-yong & Nalin Nookhwun & Passawuth Nuntnarumit & Natta Piyakarnchana & Suparit Suwanik, 2021. "Monetary and Financial Perspectives on Retail CBDC in the Thai Context," PIER Discussion Papers 152, Puey Ungphakorn Institute for Economic Research.

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    More about this item

    Keywords

    Bank; Depository Institutions; Competition; Technological Adoption;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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