How can reform of secured
transactions laws in the region be
operationalized and sustained?
12 November 2015
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SMEs in Thailand
SME in Thailand
Accounts for 2.8 million entities
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Approximately 80% of employment
Contributes to approximately 40% of GDP
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United Nations Commission on International Trade Law (UNCITRAL) and IFC
support to establish 6 secured transaction laws to widen SMEs’ access to finance
Financing
Collateral
1. Inventory and equipment acquisition
financing
 Supply chain financing
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Raw materials
Machineries
2. Inventory and receivable revolving
loan financing
 Working capital financing
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Raw materials
Machineries
3. Factoring (discount factoring,
collection factoring, maturity
factoring)
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Receivables
4. Securitization
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Receivables
5. Term-loan financing
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Movable assets
6. Credit secured by a transfer of title
 Sale and lease-back (Financial lease)
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Intellectual
Property
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“Getting Credit” is one of the 10 main criteria in
ranking in Ease of Doing Business.
Thailand ranks
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49th of 189 economies Ease of Doing Business
97th on Ease of Getting Credit (the lowest
ranking among all 10 criteria)
Cr. Doing Business 2016, Measuring Regulatory Quality and Efficiency,
A World Bank Group Flagship Report
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The 10 criteria in ranking the Ease of Doing Business
in the World Bank’s “Doing Business Report” include :
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Start a Business
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Dealing with Construction Permit
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Getting Electricity
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Registering Property
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Getting Credit
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Protecting Minority Investors
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Paying Taxes
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Trading Across Boarders
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Enforcing Contracts
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Resolving Insolvency
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The problem for Thailand was the limitation under the Thai
laws that have only 2 methods of assigning preferential
right over assets for collateral :
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Mortgages - Land, Building, Factory,
Machineries and Equipment
Pledge of movable assets that can be
properly registered such as receivables,
inventories.
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However, the current practices of pledges of movable
assets is not fully secured (Preferential right) at
present. Banks can be the challenge or the "pledged"
can be grabbed by parties.
In addition, there is also difficulty in the process of
realizing these assets, as it take a long time to go
through the court procedure and to sell through auction
by official receiver.
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Current law
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"Business" cannot be used as collateral.
Assets are taken as collateral piece by piece
and selling piece by piece.
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The value of collateral should be higher if it
can be handled collectively as a "Business"
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Thailand realizes that this limitation has
caused difficulty in the ability of SMEs to
access bank financing.
We try to solve the problem by improving and
amending the existing laws on mortgage and
pledge. However, they have not been able
to solve the problem.
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The new secured transaction law which has
been brought into consideration since 1997 has
been approved in 2015. The related rules and
regulations are in the process of being drafted
and issued.
This law will be in effect on July 2, 2016
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"Assets that have Economic Values"
can be used as collateral
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"Assets that have Economic Values"
can be used as collateral
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"Assets that have Economic Values"
can be used as collateral
- Cash Deposits
- Inventory
- Raw Materials
- All Types of Machineries
- Rice/ Agricultural Products
- Solar Cell Panels
- Aircrafts
- Trucks
- Buses
- Cars
- Motor cycles
- Ships and Fishing Boats
- Computers
- Dental Chairs and equipment
- Copier Machines
- Fishing Nets
- Food Stalls
- Intellectual Property
- Trademarks
- BUSINESS
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The giver of assets as collateral and the
taker of those assets shall agree
between themselves what assets can be
given and taken as collateral.
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• The new law focuses on assets to
secure debts in the normal system (not
in the unorganized black market)
• The taker of secured assets must be the
financial institutions.
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The agreement must be in writing
and details of the agreement and secured
assets must be registered with the registrar.
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Registration can be done:
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throughout the country,
in a fashion that is convenient, fast and
economical,
where registered information can be easily
checked and within a short period ,
where information must be in real time,
where information must be linked and
connected to other asset registration system
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Amongst secured lenders under this law
“First come/ register, First right” rule applies.
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If there is a dispute (borrower does not agree
to handover the assets to the lender) after the
borrower defaults, there are only 2 courts to
deal with the matter. The ruling of the appeal
court is final.
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Conclusion
Conclusion
• New laws as a new alternative. Bid progress for Thailand
• The existing laws on mortgage and pledge can still be used
• More assets, e.g. the "business" itself, can be used as
collateral
• More flexibility: Agreed between the lender and the borrower
• First Register, First Right over the assets
• The assets can still be used by the borrowers for their
business (Floating)
• Agreement between the 2 parties
• Do not have to go to court (if no dispute)
• Do not have to go to official receiver in doing an auction
• Faster court procedure
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Expected Results
Expected Results
• More SMEs can access financing
• Reducing borrowing from "Black Market"
• Reducing risk for lenders and more potential
business as more choices of collateral and
faster time in realizing collateral
• Better for the country : potential for economic
growth, more investment, better life
• Address the major negative issue in the World
Bank’ s Ease of Doing Business ranking
competitiveness for Thailand
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How can the reform of Secured Transactions Laws
be Operational and Sustained ?
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Benefits for all parties
Strong support from both government and
private sector
Protect all parties who that are prudent and
uncorrupt
Standardize practices nationwide
Standardize documentations
Transparent, Fast, Low Cost
Good and reliable registration system
Good and secured IT system
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Thank you
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