The regulator said the loan initiative aligns with government policies aimed at limiting air pollution and promoting environmentally sustainable industrial practices, reports the Bangkok Post.
The government has encouraged fresh sugarcane harvesting as an alternative to burning for some time.
However, a lack of cane harvesters is cited by farmers for their continued burning. Financial support from the banking sector is expected to nudge the industry towards a more environmentally sustainable model.
Under the programme, KTB and SCB developed tailored loan products to support sugar businesses. The transition loans finance the purchase of efficient agricultural machinery, such as cane harvesters and leaf compactors, that will reduce the level of PM2.5 pollution.
The loans offer favourable interest rates and extended repayment periods of up to seven years, with principal payments required only once a year to align with the seasonal income cycle of sugarcane harvests.
To qualify, participants must demonstrate a reduction in the proportion of burnt cane purchased compared with the previous year, ensuring this proportion falls below the national or regional average. Participants must also meet additional conditions set by banks.
The programme is being monitored and assessed using concrete performance indicators, according to the central bank.
SUSTAINABLE LENDING
Roong Mallikamas, Deputy Governor for Financial Institution Stability at the Bank of Thailand, said the regulator implemented a sustainable finance strategy aimed at encouraging financial institutions to take a more active role in supporting businesses as they transition towards environmental sustainability.
As part of this initiative, KTB and SCB initially committed to jointly providing loans to the sugarcane and sugar industry, with a total credit line of more than B4 billion.
As of February this year, the duo had extended loans worth B1.51bn.
“Although only two banks are participating in the pilot programme, many other financial institutions have begun offering sustainability-linked financing to businesses in various sectors, aligning with Thailand’s broader transition to a sustainable financial and economic system,” said Ms Roong.
The pilot project may expand to include other interested banks in the future, she said.
The scheme also seeks to promote greater collaboration between public agencies and the financial sector to support Thailand’s transition to sustainability, she added.
Yunyong Thaicharoen, Senior Executive Vice-President at SCB, said the bank recorded strong interest from entrepreneurs in the PM2.5 reduction loan scheme, reflecting growing awareness and environmental responsibility.
SCB, the country’s fourth-largest lender by total assets, offers preferential interest rates to operators purchasing cane harvesters. These operators then provide harvesting services to farmers.
A loan condition is operators must purchase fresh sugarcane at a proportion higher than the industry average, said Mr Yunyong.
“The average proportion of fresh sugarcane purchases has continued to rise, and currently hovers around 70-80%, reflecting a decrease in sugarcane burning,” he said.
“The bank’s business customers have consistently increased their share of fresh sugarcane purchases.”
FUNDING THE TRANSITION
KSL Group, a leader in Thailand’s sugar industry, joined the Financing the Transition programme through its subsidiary New Krungthai Sugar Co.
Piriyapol Chinthammamit, Deputy Managing Director of KSL, said in a magazine published by the central bank that New Krungthai signed a loan agreement with KTB for funding to acquire cane harvesters.
The company bought 10 additional cane harvesters, enabling it to harvest more fresh sugarcane, reducing sugarcane burning by up to 100,000 tonnes a year, equivalent to about 10,000 rai of farmland.
In addition to addressing PM2.5, the loan can help the company tackle the labour shortage plaguing the sugar industry, he said.
“With the new equipment, our fleet has grown to 50 harvesters, which are used both for our operations and to provide harvesting services to member farmers,” said Mr Piriyapol.
“Across the country, there are now several thousand sugarcane harvesters in use.”
As the amount of sugarcane burning eases, the level of emissions is also decreasing.
He said this type of investment not only addresses the PM2.5 problem, but also raises production efficiency, enhances the company’s image, and builds confidence among its domestic and international business partners.
Mr Piriyapol said financial backing from banks plays a pivotal role in the industry’s shift towards sustainability, particularly through the adoption of advanced machinery and automation technologies.
The widespread adoption of cane harvesters eases the struggle with labour shortages and increases the volume of fresh, sustainably harvested sugarcane delivered to mills, he said.
However, the high cost of harvesting equipment remains a major hurdle.
Imported machines typically cost between B10-12 million, while locally produced ones cost B5-8mn.
Operators must have improved access to financing to scale up the use of harvesters and phase out manual labour and burning practices, said Mr Piriyapol.