The Bank of Thailand has raised concerns about rising financial costs for micro-SMEs (small and medium-sized enterprises) as they increasingly rely on nano-finance loans amid tighter access to bank credit.

According to the edited minutes of the central bank's Monetary Policy Committee (MPC) released on Wednesday, the committee expressed concern about increasing funding costs for micro-SMEs stemming from greater reliance on high-interest lending products.

Central bank data indicated total outstanding nano-finance loans tallied 94.5 billion baht as of January this year, representing year-on-year growth of 56%.

The MPC questioned whether the trend reflected existing borrowers facing higher credit risk -- which could limit their access to traditional credit -- or an expansion of lending to new borrowers who had previously relied on informal financing.

The MPC secretariat reported most borrowers using high-interest loan products were new customers, reflecting strategic shifts by some commercial banks seeking to expand their customer base through products such as micro-finance and nano-finance.

"For micro- and nano-finance loans, micro-SMEs are typically charged interest rates close to the regulatory ceiling of 28-33% per year," noted the minutes.

Most existing borrowers continued to receive interest rates broadly in line with previous levels.

Given these developments, the committee said it would monitor credit conditions and the transmission of monetary policy. Targeted financial support measures, particularly credit guarantees under the "SMEs Credit Boost" scheme, are expected to help vulnerable borrowers, noted the MPC.

Although bank interest rates have declined in line with earlier policy rate cuts, funding costs for micro-SMEs remain elevated. Apart from increased borrowing through high-interest loans, the credit risk of this borrower segment remains relatively high, the minutes noted.

Meanwhile, bank lending continued to contract, largely due to weaker demand from large corporations amid slowing investment and heightened economic uncertainty. Financial institutions also remained cautious in extending loans to new borrowers and higher-risk groups, particularly SMEs and vulnerable households, said the MPC.

Credit quality among SMEs has deteriorated. Although the non-performing loan (NPL) ratio declined in the fourth quarter of 2025, the drop was partly attributed to year-end balance sheet management by financial institutions.

Going forward, authorities need to monitor the quality of SME and housing loans as NPL ratios in these segments remain elevated, noted the minutes.

Kasikorn Research Center (K-Research) expects the transmission of policy rate cuts to lending rates to provide meaningful relief to borrowers this year.

Interest rates across the banking sector have gradually declined over the past 18 months, in line with the regulator's monetary easing cycle.

Given this transmission process, K-Research expects borrowers to benefit more clearly from lower interest rates this year, supported by policy rate cuts at the end of 2025 and last month.

These reductions are expected to gradually feed through the financial system over the course of the year, noted the think tank.

"Some 71% of outstanding business and retail loans are expected to enter the lower-rate adjustment period, reducing interest burdens for households and businesses by 14-14.7 billion baht," K-Research said.