pattaph

There seems to be a lot anger and bad feelings aimed at the Thais here. Many people are assuming that they are just plain ignorant, and I will not venture to guess why this is so. I've actually been doing research on consumer credit in Thailand and have looked into the rural credit system. My findings are:

1) These interest rates are comparable to rural, informal rates the world over. The new field of "micro-finance" is attempting to address this problem specifically. And it is a tough nut to crack indeed. If you're interested, check out www.gdrc.org. A website all about global efforts to finance poor people's needs for capital. The problem is one of policy, and is common throughout the world. The problem is not uniquely attributable to local ignorance .

2) These rates definitely seem extortionary. But analysis has shown that the rates are simply the result of an imperfect credit market, where poor people simply don't have access to bank loans at formal market rates.

Some of you may have heard of Ammar Siamwalla. He is arguably the most respected economist in Thailand and heads the Thailand Development Research Institute. He wrote a paper in 1990 for the World Bank. Here is the abstract:

Thailand has sought to increase farmers' access to credit by government intervention. In 1966 it created a government agricultural bank to lend solely to farm households, and beginning in the late 1970s it required commerical banks to lend heavily in the rural sector, either directly or by making deposits in the agricultural bank. The result was an enormous expansion of credit in the rural sector. But because formal lenders were either unable or unwilling to solve the information problems involved in the broad range of rural credit transactions, the informal credit sector (which charged interest rates many times higher than the formal sector) continued to thrive. Using household surveys and surveys of moneylenders, this article provides a detailed analysis of the ways in which lenders in the informal sector have solved the information problems of providing credit. The authors argue that the informal sector is competitive, and that high interest rates reflect high information costs, not the scarcity of funds.

According to official figures, it looks like the average income for a working person in Thailand is 7,864/month. The median is 4,576. The top 1% of working people, or 364,000 people avg 46,382. Although this last figure seems a bit low.