SET Reforms: Reducing Barriers and Opening Capital Markets to Small Businesses
There’s a well-known saying in Thailand: “The poor buy lottery tickets, while the wealthy invest in stocks.” This reflects a deep-rooted perception about wealth disparity and the financial choices people make. Those with limited income often rely on lottery tickets as a form of financial hope, while those with knowledge and capital opt for investments in the stock market.
As a result, the Stock Exchange of Thailand (SET) is frequently seen as a space for the “big players”—large corporations with solid financial footing and national recognition. Meanwhile, smaller players, such as SMEs and startups, face significant challenges in accessing capital.
For many small businesses, raising funds through traditional banking channels is already a tough road. Accessing the capital market through SET or the Market for Alternative Investment (MAI) feels even more out of reach. According to the Bank of Thailand, fewer than half of the 3.2 million SMEs in the country can access credit, despite SMEs contributing more than 35% of the nation’s GDP and employing over 70% of the workforce. Startups, which are key drivers of innovation, face even greater hurdles in securing funding.
Alternative Channels for Small Players
To address these challenges, Thailand’s Securities and Exchange Commission (SEC) has introduced alternative funding options tailored for small businesses through three key platforms: PP-SME, Crowdfunding, and LiVEx. This approach mirrors the UK’s successful Alternative Investment Market (AIM), which provides smaller businesses with an accessible fundraising channel. In 2022 alone, AIM welcomed 852 small companies, raising a total of £135 billion.
In Thailand, while the fundraising volume from PP-SME, Crowdfunding, and LiVEx between 2020 and 2024 stands at 16.5 billion baht, there has been a clear upward trend. Particularly notable is the growth of debt crowdfunding, where SMEs issue bonds via crowdfunding platforms. In 2021, the total raised through debt crowdfunding was just 1.26 billion baht, but by 2023, it had jumped to 6.16 billion baht.
Regulatory Challenges in Debt Crowdfunding
Despite the growing popularity of debt crowdfunding, several regulatory hurdles still make it difficult for SMEs and startups to fully leverage this fundraising option.
- Complexity in Offering Secured vs. Unsecured Bonds
One major issue is the confusion surrounding the approval process for secured and unsecured bonds. Offering secured bonds requires additional documents, such as the appointment of a bondholder representative to safeguard investors’ interests. This process is more complicated than issuing unsecured bonds, increasing the risk that SMEs and startups might unknowingly sell secured bonds without proper approval.Failure to comply with these regulations results in a minimum fine of 500,000 baht—the same penalty imposed on large corporations. This minimum fine can be disproportionately harsh for SMEs, whose typical fundraising value averages just 2 million baht, much lower than that of large companies.
Recommendation:
The SEC could consider revising the penalty structure under the Capital Market Supervisory Board Notification (TorJor. 21/2562) to better reflect the scale of the business and the value of the fundraising. This would create a more equitable regulatory framework and reduce the financial burden on small businesses. - Capital Requirements for Crowdfunding Platforms
Another obstacle is the regulation that requires crowdfunding platform operators (Funding Portals) to have a minimum registered capital of 25 million baht to act as a bondholder representative for secured bonds issued through their platform. This high capital requirement prevents new, capable platforms from entering the market and forces SMEs to rely on external representatives, increasing their costs.Recommendation:
The SEC could review this capital requirement to allow more funding platforms to act as bondholder representatives, which would reduce issuance costs for SMEs and provide investors with more options for secured bonds.
Beyond Regulation: Building a Supportive Ecosystem
While regulatory adjustments are essential, they alone will not solve all the challenges faced by SMEs and startups in accessing funding. Other obstacles—such as the lack of business readiness or investor confidence—remain significant. Building a supportive ecosystem that integrates regulatory bodies, financial institutions, and educational initiatives is crucial for creating a more inclusive capital market.
Providing training and resources to help entrepreneurs navigate fundraising processes, coupled with efforts to boost investor confidence, will play a key role in promoting growth. A well-rounded approach can transform Thailand’s capital market into a fair and open space, truly becoming a market for everyone.