Pls Explain How Farmers Finance Themself

[THAIPHUKET]

I am trying to understand, how farmers are financed. Hear a lot about rich people from the city lending at exorbitant rates. Please give detailed info about the financing structure of farmers/ villages.

It seem farmers are heavily indebted with little chance to get out. Plus the pieces of land do become smaller with every generation because all of the many kids get their share of the parent's land.

I am tempted to help 'my' villagers' within reason ( microfinancing or similar).

Have you done it? Your experience?

[Maizefarmer]

They are inded (in debt) ........ and that is the problem with the small Thai farmer: he lives in a never ending circle of seasonal debt.

The problem is multi-facited, but eductaion, or lack of it to be exact, and size of farm (scales of economy) are common problems.

Micro financing? your golden rule has to be loan security - which means been able to "attach" land titleship to the loan. The problem here is that I would think you will find on closer investigation that much of the land that is farmed on in rural areas is Sor Por Gor titleship i.e. the farmer doesn;t own it - it is on perpetual lease to him from the goverment, and as such its use as security is not possible - and while some folk wil tell you there are many ways to skin a cat, believe me, if it's about manipulatig the SPG land titleship rules & regs for lending, the only one at the end of the day to get skinned will be you!

Privately owned land - yes, so long as there are no pre-exissting charges registered, you get given the original titleship doc's in your hand, and you go to the trouble of regsitering the "charge" down at the land reg office. To have any chance of this succeding, you will have to offer terms that beat commercial lending & Thai libor (i.e. interbank lending) rates - and as they currently stand, the banks are not lending much more than around 30% - 40% max of land asset value!! So, the market is pretty much stretched to its limit as it stands at the moment.

But all that said, loans by themselves I do not believe personally are the way out of the problem in the long run - if anything, it perpetuates the cycle , just at slightly better terms. What the Thai ag industry needs even if you can find a way to lend successfully (and successfully means : securely and at rates that make it attractive to borrow from you), there has to be a plan in place that changes the status quo of the farmers lot in life i.e. the loan should be to facilitate actions that lead to a better set of cirucmstances for the farmer. Here's an over-simplified example of what I mean:

10 farmers - who between them own say 200rai (whatever the crop/animal maybe). Individualy their net incomes are typical of small farms - but if they were to work collectively, the scale of economies could be changed quite significantly.

If they purchased their seasonal fertilser requirements collectively the dealer would get a bigger order and could offer a bigger discount, if they purchased their seed crop collectively - same as above, individualy they would never be able to afford to buy a tractor, but if could get an agreement between them, collectively they may well be able to share the expense of purchasing a tractor that they then make availible to each other to use.

The tractor example is actually quite a good one, because it will mean working together. It will mean crop cultivation and harvest planning so that their respective needs for land prep (i.e. ploughing) and harvesting do not conflict, it will mean entering into agreements amongst themselves to allow farmer A to plough over days 1-3, farmer B over days 4 -6, farmer C over days 7 -10 ect ect ect ......... so that when harvest time comes they don;t all need the tractor on the same day.

If irrigation is an issue, the tractor can also be used as a power source to drive a pump - so now instead of everyone having to buy there own pump and engine, the have one now that can be shared.

The point of all this is: if you want to get into micro-financing, it's my humble opinion that, not withstanding the market conditions, potential exists to do so successfully by identifying common needs amongst small groups of farmers in close geographical relation to each other. This allows them to work collectively as much of the crop type and requirments will be common to all them. It allows the risk they take in taking out finance to be split amongst all those in the "co-op" structure that is formed around the micro-financing you are willing to offer, and it exponentialy reeduces the risk you are exposed to from one person to a group of people - in short: it reduces the amount each member has to borrow, and it reduces your expose to default.

Its schemes like these I think have potential to change the circumstances for the better - the tractor example is just one of many types of collectively lending that could increase efficiency amongst a group of farmers - and better efficiency mean greater net profit at the end of the season. It could be towed behind grass cutter/forage chopper, it could be a pump or irrigation tubing, it could be a common milking parlor, bulk purchase of fertilser, animal feed, crop seed ......

What ever you micro-finance plan is about I think it should be against the background of understanding what the problems are, and not the typical type of lending that is so common in Thailand i.e. that lending which is handed out to farmers to carry them over from season to season. Nope – as I said earlier, this type of lending does little (if anything at all) to resolve problems in the long run.

Resolving problems for the long run means addressing the problems that farmers face. Granted, not all can be solved by way of micro-financing, at least not through the life of the loan – but some can, and some of those that can, can make a substantial difference in the long run. The example above is all about increasing efficiency through changing “economies of scale” by way of reducing cultivation costs.

I have touched here on a subject that can be discussed for hours, a subject that would require 100’s of pages to be written up and debated on, before even the basics were addressed, let alone covered. I think your gesture and sense of social conscience is very honourable – but, and it’s a fairly large but: for it to succeed for both you and the farmers who make use of any loan provided, it will need to be secure (for you) and it will need to contribute in some way to addressing the long terms problems farmers in Thailand encounter – not merely serve to carry them over form one season to another.

I wish you luck

[mailman]

I was told there is Bank called the Bank of Agriculture and Agricultural Co-operative that lends to farmers. I think it's government sponsored and they have a website.

They were quoting loans for co-ops for 4.5%. Anyone know anything more about using this Bank or had any experiences with them. Of course, since only Thai's can own land, it's for loans to Thai's only.

[Maizefarmer]

I was told there is Bank called the Bank of Agriculture and Agricultural Co-operative that lends to farmers. I think it's government sponsored and they have a website.

They were quoting loans for co-ops for 4.5%. Anyone know anything more about using this Bank or had any experiences with them. Of course, since only Thai's can own land, it's for loans to Thai's only.

You are correct, mailman - and that is exactly what BAAC is there for, but like all banks it still has to run on commercial principals - even if those principals are relaxed somewhat to take into consideration the nature of the loan and the purpose they are designed to serve, they still have to be commercialy vaible.

The low interest rates at the moment reflect market conditions. The success of unregulated money lending and the high interest rates that go with, reflect the high number of farmers who do not, or cannot satisfy the min requirements laid down by BAAC to borrow - and the lending risk they represent - and the greater the risk, the greater the interest rate charged.

Of course that doesn't justify extortionist interest rates, but thats the reality and nature of unregulated high risk lending beast.

While land has traditionaly been the form of security put up by borrows, most banks are now sitting on so much land asset they don;t know what to do with it. Collectively if the banks had to dump all the land they currently hold as a result of poor lending, the market impact would drop land prices even further - so they are inclined to hold onto it and wait for the market to rise again (which it will do in due course when the cycle swings round).

So what are some of the banks now doing? - allowing farmers to use forecasted crop/harvest as security - irrespective of who owns the land, or what the land title is - they've started futures trading, and its turned to be a rather successful way of lending. Doesn't matter if the yields are low, or damaged/lost - borrows have to take out loan/crop insurance, and guess who sells that to them? - I'll give you one guess.. Crop insurance is compulsury, so it's a win win situation - they make on that as well.

With the government garunteeing a min crop price the banks know exactly where they stand risk wise in terms of what/what not to lend farmers.

[somo]

I have tried to help some farmers in my wifes village with small loans in the past but have given up.

Most grow cassava where she comes from but can't afford the fertilizer to get a decent crop. I lent one guy 8000 baht to buy some NPK and even went to buy it with him so he didn't party it away or waste it on something else.

I heard later that he sold it for between 6 and 7000 baht, paid of 3000 debt to one of the cassava mills and pissed the rest away!

He also boasted about how he had conned money out of the stupid farang!

He was of course very apologetic when I confronted him and I did get my money back (in the end!) but the whole thing was just a big hassle and made me realize that I would never be able to change this way of thinking.

As regards getting 10 of them to buy a tractor together is a lovely idea in principle but not practical. Getting 2 of them to work together would be tricky 10 pure fantasy! There would be arguments about who used it most who paid for the last lot of fuel, renting it out to ploughing other land, the list of potential disagreements is almost endless.

They would all end up fighting and in the end one disgruntled member would probably sabotage the tractor so no one could use it. The whole idea of working together for the common good is something they just wouldn't think about.

Where they do cooperate is working on each others land for free in a kind of labour exchange and that also results in arguments but the jobs do get done without much cash changing hands. Bacause they can't afford the fertilizer and weedkiller the returns are small and if they totted up the days they worked in a year and compared it to the money from the sale of their crops I bet it would be less than the 150 Baht/day they get from someone like myself. They are proud and it makes them feel good when they get a lump sum from the mill for their years work.

Currently the market price for cassava is high so a lot of farmers are digging up 6 month old tubors which have just got going to take advantage of the price. Some have tried replanting but with no rain most of it dies so they will have to buy new stems to replant next May when the price will probably wipe out anything they got from selling now.

It just seems an endless cycle of grief and although I wish I could I can't see a way out of it.

[slapout]

somo; you make some very relevant points about the general farming sector of Thailand and elsewhere. Farmers by their very nature are independent and when they need/want to get in the field, would be hard pressed to share machinery with anyone else. Coop farming where successful, seems to be more about marketing/purchases than machinery use etc. I have seen equipment such as disks, balers, etc shared by 2 farm operators, but they had alternate machinery that could be utilized while waiting for the shared equipment. (round baler vs square, disk vs chisel etc) Farming is similar to the stock market in that you have windows of opportunity, in farming when you miss the good conditions your crop suffers (pocket book) just like the other markets.

[somo]

slapout.

The analogy with the stock market is spot on as we are all gambling that next years price of whatever we are growing will be high enough to justify all the work/money we put into it. The price can swing either way but the costs stay fairly level. Having enough cash to enable you to put off harvesting and wait for a better price is a luxury most farmers don't have. Most of them are in debt to the mills in my area who thus have the power to force a farmer to harvest when they want not when it suits him.

The gov guaranteed price was presumably meant to alleviate this lottery but as it is only in effect for short periods at a time it doesn't help. Farmers need to know with more certainty what the minimum price will be a year ahead. No one trusts the gov. to do that especially with the corruption associated with previous price support schemes.

It maybe wishful thinking on my part but I think the future for prices is quite rosy. When the dollar is weak commodities of all sorts tend to become more expensive not just as a hedge (gold has more than doubled over the last 18 months) but also because many of them are priced in dollars so they rise to compensate. This tends to later be followed by other commodities not just priced in dollars. That's my theory and I,m banking on it

[THAIPHUKET]

Gentlemen, your input is comparable to 2 semesters at the agri university, at least. Most informative. Where can I read more?

I am not thinking big, would be foolish for someone who doesn't speak the language or understands anything about farming.

What I'm doing is small.

I understand the government installed a program , let's name it village bank.

Under the program villages got 1 m b. Administered by some senior villagers. No finance pros involved. Farmers can draw down cash, don't now on what basis.

However ,loans must be repaid once year for 7 days. Here the scramble for cash starts. Only few got the money to repay such loans even for short term.

I provide the liquidity for these few days. No collateral, only the word of some 50 families to pay back.

Even in the worst case event that I get nothing back, the loss will not kill me.

No spread sheet, no proper analysis of the risk just trusting me instincts.

So, I am not worried at all, I'm not trying an after-the-fact-justification.

What I would like is to get a better understanding of how things tie together.

[somo]

"I provide the liquidity for these few days. No collateral, only the word of some 50 families to pay back"

Sounds like financial hari-kari to me

[Khonwan]

Hi ThaiPhuket

I’m trying to understand what exactly it is that you still require to learn with regards to how things tie together. As you’ve said, a committee set up to administer the loans dispenses these at the beginning of the loan year and expects repayment by the end of the loan year. The loan amount advanced reflects the number of applicants plus their perceived ability to repay. The sum total of all loans must be repaid before a new loan disbursement is made (normally 7-14 days). This effectively means that the fellow borrowers guarantee each other since any default delays future disbursement until such time as the total sum is repaid.

I have intimate, lengthy, and ongoing experience in this subject. You will most certainly lose money should you offer bridging finance without security and without interest. You say that you are prepared to do so...but are you prepared to do so every year? With the losses to you increasing exponentially as your fellow villagers realise there are no negative consequences to them making an idiot of you (not my perception, by the way).

How does it benefit your community to offer this assistance for such a limited period, i.e. the length of time it takes you to decide you’ve lost enough money?

Be aware also that a person who repays a loan (perhaps with money provided by you) may receive a new loan of less than that of the original loan...or may not even be offered a new loan. The former can often happen where the number of applicants increases; either scenario can happen if the committee take the view that the borrower is a bad risk. Such a borrower may therefore be completely unable to repay you in full...or in part.

You will be of greater assistance to them should you offer cheaper finance than the competition...at a rate of interest designed to compensate you for the occasional loss. That occasional loss will only be occasional if you obtain some security against the loans, which could be via pre-prepared (in the event of default) land rental agreements, or land deeds, etc. The normal (albeit illegal since the law caps interest at 15% per year) upcountry farming community bridging rate (in my experience) is 5-10% (usually 10%) of the sum advanced. You could charge much less than this to protect yourself and then use the profit, should you wish, to fund worthwhile projects within your community.

By following this strategy, you are more likely to be able to continue to assist your community for years to come...and gain a great deal of respect too.

However, none of this will be remotely possible unless you have a Thai partner who is as equally dedicated to preventing defaults. Your partner must be well integrated into the community with an extensive network of friends who will keep your partner abreast of the financial ability of potential borrowers and provide advanced notification of potential payment problems.

Rgds

Khonwan

Edit: format.

Edited December 3, 2009 by Khonwan

[slapout]

"I provide the liquidity for these few days. No collateral, only the word of some 50 families to pay back"

Sounds like financial hari-kari to me

This system sounds like the American share loans made to a limited group after initial investment by all the members. There a several versions of this going around periodically as people forget past history. hari kari is a very apt description.

[THAIPHUKET]

I hear you load and clearly. All I can say is, I am still confident. I should add that I dont appear in person, all is done through family. No bad experiences in 5 yeears, no sucking for.....

Another reason is that the village bank bridge financing is an established routine funded by Thais. Sure it would be easy to say No interst charges but 2 reasons are agianst this

- not to upset any previous lender too much about lost business.

- it would clearly send the wrong signal craving for exploitation,

the interest is 0,5 b under what seems to be standard.

I will have no hesitation to tell you how it actually went, one way or the other.

To clarify my earlier question or desire to understand=

HOW DO THINGS TIE TOGETHER???

Because I know nothing any info, suggested reading that gives a basic but structured picture of

a rice paddy farmer life, his financial situation

and how the rice industry in Thailand functions

written in non-academic words would be helpful.

One you send a PN, thanks for that .

[AsiaCheese]

They are inded (in debt) ........ and that is the problem with the small Thai farmer: he lives in a never ending circle of seasonal debt.

The problem is multi-facited, but eductaion, or lack of it to be exact, and size of farm (scales of economy) are common problems.

......

I wish you luck

What you're writing is 100% correct, 100% right and 100% good. What you also wrote is that there's a lack of education, and that has a way of turning the tables on just about everything. I've been in many discussions with farmer families, and most of it ended in "that's the way we've done it for generations; it can't be wrong". What they don't realize is that times have changed, and that there are numerous people and businesses out there ready to rip them off 24/7 with "great offers".

There's also the slightly unfortunate attitude that when the day's done and there's enough Thai "whiskey" to get everybody singing, live's okay as it is... Why bother thinking about tomorrow.

[bina]

i have to say: in israel, the idea behind the moshav (not the kibbutz which was an entirely communistic set up in the beginning) was exactly that. every farmer had his plot but the funding and equipment were communal/cooperative. fertizlizers were bought in bulk and handed out according to the needed amount. all of this was based on, of course, the future crop harvest.

a good idea but in reality, as most moshavniks today can say: its a no go. there will always be the bad planners, the over enthusiastic borrowers and buyers of equiptment, fertilizers, seeds whatever. water prices went up. bad crops came and went. more debt to cover the last years debt. in teh 1980's many many moshavim (the people in them i.e.) went broke, completely. teh 1990s agrotechnology has taken over (along with the thai workers)so only the strongest richest managed to continue. my whole area here used to all be chicken houses and orchards. now most of the chicken houses are mini hotels for the (not so wonderful) tourist trade.

the m oshavniks borrowed and borrowed. now most are not farming anymore. bankrupt. there were suicides because of lost honour and debt.

the cycle for most farmers regardless if they are thai israeli or french is one of debt, borrowing against future crops, crop failure/ruination, debt.....

even if farmers become cooperatives, unless they ahve a few very charismatic people with good financial backgroud , involved, it is a recipe for disaster as someone wrote: pettiness, orneriness, and also, the thai distaste for anything that smacks of communism, whatsover. i hear anon explaining kibbutz and moshav to thai workers here, and they use the word communist/socialist as if it was a curse.

ive come to the conclusion that a thai farmer can only help himself. those that come back with knowlege from overseas (we have two friends that are doing that now, with limited success in their first year) might have a chance. but a successful first year does not mean a good second year because of poor or no money managment whatsover because filial/familial circumstances get involved (hospital/house/sick buffalo among the members of the rest of the uneducated family). it is hard for one knowlegeable farmer to hold out against all his neighbors/family about using money and wise investments.

in short: unless u are an agriculturalists, speak the language, and have money to spare for the long run: hari kari it is.

bna

israel

[THAIPHUKET]

so what you all are saying, basically there is no future for Thai farmers because there seems so be not enough time for an orderly transition into a modern agricultural society. Is that so?? If so how do you paint the picture?

Only monopolistic enterprises with ----within limits------ foreign shareholders?

All the small farmers simply working on time contracts?

Any estimate how many people we are talking, how many families?

[bina]

not enough time for an orderly transition into a modern agricultural society

not so sure its about time. its about money and knowlege and teh ability to implement the knowlege with the money available. something that thais dont or cant do. how many countries have a good working agricultural society with small farmers? (maybe in europe,? i havent a clue. for sure its not the american small farmer)

like any agricultural transistion: the small farmers die off, dry up, sell out, agro tech rules with wealthy company owners; agriculture as a way of life is dying out. the yoiung folks prefer the city and teh farm is somewhere to go for a break or between jobs.

where does it leave the farmers? they same as now: large % (just my guess-- 29 000 legal thai workers in israel alone in 2009 working agriculture here) of the males of working age overseas as migrant workers, or within thailand as cheap labour in the large cities; more and more elderly poor in the villages, teh villages start to fall apart, therefore there is cheap land to be snapped up by groups for techniagriculture, housing units or industry, etc etc etc.

its going on around me this very minute, not in thailand. its been a 10 year process here so i expect the same for thailand .

most of the small farmers here have turned farming sheds, storage areas, and tractors into B&B rooms with tractor hay rides for the kiddies, petting zoos, short time getaways in the pastoral orchards/vineyards. im pessimistic.

bina

israel

[somo]

bina

Sad to here about the farms in Israel. I spent 6 months on a kibutz in the 80's and had a great experience although my kibutz (Ginosar) also had a fishing boat, and small hotel it seemed successful. Hopefully it is still going strong.

As to what can be done to help the farmers here some sort of guaranteed price level for at least a year ahead would help them plan. no one knows what will happen with the current govermant plans in a years time or trusts them not to change their mind. If money was put into that and education as to the best way to maximise returns from their land then the younger ones would soon grasp it. Finance tied to investment in the land ie fertilizer etc would also help.

This would of course cost money but probably less than the losses incurred from giving out short term bridging loans that won't be repaid.

[ozzydom]

Sad to say ,but I have reached the conclusion that it is nigh on impossible to "help " the small landowner/ricegrower out of the never ending debt cycle that is the status quo .

That statement is made after 9 years of observance of the farming practices in and around the village I reside in.

For instance , harvest finished about 2 weeks ago and of the hundreds of rai of paddy spread along our Klong (which never dries ) only about 30 rai is being prepared for a second crop.

It is well known that the second crop (where water is available) has a higher yield than the early crop which relies on seasonal rain for its success or failure, as the November-April period is the natural peak crop growing period.

There is a method available which uses aerobic bacteria to quickly break down the stubble of the previous crop when the stubble is ploughed in immediately after harvest, allowing resowing within a week or two.

My next door neighbour is a prime example of the ignorance/laziness I see all around me.

He has 6 rai of paddy , this season he had 50% crop failure because of flood and snail damage ,so I asked if he wanted to do a second crop, his answer was No, his reason ,no pump to move water the 20 metres from the Klong, so we offered to divert our pond water as we do regular water changes.

All he had to do was prepare and plant and we would irrigate for him ,no charge, (because of the amount of nitrate in our ponds he would not even have to fertilize), but no, he could not be bothered,so the wife offered the deal to the other side neighbour (only 3 rai ) with the same result .

I was tempted to lease their paddy and do a crop ourselves,to demonstrate the benefits of this course ,but the wife reminded me of the anomosity shown to me the last time we did a rice crop (which yielded over 300% above the local average). They reckoned I was some sort of witch doctor who had the spirits helping me.

[Mikki]

Hi.... i recon its harakiri you guys mean? or seppuku as its written Its not my intention to be rude but if you start to loan money to the right and left your wallet will soon be thin and sharp enough to perform harakiri.

The thaifarmer must be extremely strong to stand against the "family swamp". I just bought a kubota from a young farmer who had to sell

it, because he had to bail out his father. He works hard and did well so he gives his father money, father buys a car because he thinks

next year he will get more money. But the son had invested his money in his house, so he sells the kubota to save his fathers face.

I told him that if he wants and can he can buy it back.

Mikki

[Mikki]

Hi again sorry but i forget to write that the rate on a loan could be 2-3 percent a month from a "loan shark" or your neighbour if he has money to lend. and its common and accepted so it seems to me

by again Mikki

[somo]

In my area loan shark rates are 5% - 10%/month!

[Beardog]

In Bang Sare area 20 kilos from Pattaya it is the same 5-10% a month & they want the paperwork on your land or Truck as collateral. I am not farming for profit but several people have tried to offer my lady loans & she tells em to piss off! I don't see unless you got Gold or oil on your land how you can hope to get anything but misery on that high of a loan!

[bina]

korat 5-10% with deed land/truck collateral; MIL has a side line doing this but the deed land is sometimes for up to 5 yrs in which time relatives pressure the owner of the land to not hand it over, people die suddenly, all sorts of things happen. the same reason we moved a chanote piece of land to husband's name is that the land that his mother gave us as a present actually has been 'jam' (signed over as collateral on one such loan the sister needed at the time, she overruled her mother)for 5 yrs, meaning that if the family cant pay off the loan, OUR land (the one we were supposed to get) would belong to someone else. therefore, we took a less useful piece of land w/o having liens on it (not bank, the issaan loan type) , to keep it in case the rest of the land is lost.

an other piece of land was collateral with MIL but the person who borrowed the money apparently wasnt the true owner, it was four other brothers, who now refuse to give over the land (havent paid the debt off obviously). pu yai baan time.

my theory when doing things with agricutural country thai is: if u dont see it up front, then it doesnt exist. rather reminds me of third and fifth party checks in israel that people used to give to pay off loans.

teh road to hel_l is paved with good intentions, good ideas at the time, and lack of the knowlege of the realtionships between people that are just below the surface of the community/village.

lender beware.

bina

israel

[Maizefarmer]

teh road to hel_l is paved with good intentions, good ideas at the time, and lack of the knowlege of the realtionships between people that are just below the surface of the community/village.

Well said....

[THAIPHUKET]

I confirm that all loans were repaid in full and on time, no exceptions , no attempt to delay.

You, however, made me aware not to expect an equally high repayment rate next time around.

I hear what you say about work morale or debtor ethics. Is this not too much of a stigmatization ?

Zero potential humans? No challenge wanted, no desire to end this devilish circle ?

Hard to believe. Perhaps some positive experiences , someone ????

[Maizefarmer]

Yup - I can quote some success stories, but they all invovled Thai folk who I had known for a considerable amount of time and who had established and verfiable credit track records - and that has to be part of any lending/loan decision, afterall, it's not for no reason that commercial lenders undertake due dilligence when it comes to lending.

So yes - it can be undertaken with success, though I have to say, in the few cases I have helped out in the past and got my money back I wasn't lending in the first place on a commercial basis i.e. to make money out of the loan - it was to help out,and on the one and only occassion I have lent on a commercial basis, despite getting a credit check undertaken, I ultimately had to resort to auctioning the land title that was signed over as security.

In the long run, like lending anywhere else in the world, no matter what the motive or intention is (let alone lending on a commercial basis) you have to have security which can be realised if the debtor runs into default - without it, it's no business to be involved in.

PS - there is a standard form that can be picked in shops, that rural money lenders to secure loans to farmers with - against the borrowers land/house papers. This doc is a gov approved/legal document and is quite common in rural areas - alot of rice farmers know exactly what it looks like and what it is. The interest rate is not set - it's something you (the lender) and the borrower agree on, along with the repayment timeframe and a few other points - but it lays out the law and how it pertains to both the borrower and lender. It is in short, a legaly binding contract to both parties.

[THAIPHUKET]

Thanks Maizefarmer,

I 've seen this form, it was used with the family as creditor.

Can you give me an idea what is says in the event of default ?

What is the process?

[Sunfarmer]

G'day excellent forum ... I have been lurking for some time ... but this thread was why I joined ...

I'm an economist/ecologist with 30 years of looking a farm production systems and management practices in Australia and elsewhere. I'm now working voluntarily for Bangladesh's Grameen Bank in Australia... I have looked at a lot of well-intentioned ventures... This one has many valuable lessons. Grameen Bank of Bangladesh turns many common sense notions of finance on their head. It is how to win a Nobel Prize for Economics.

This system won't let me even type in a site address apparently but have google at Grameen Bank Info ... its well worth a look ... quite inspirational.

Grameen Bank delivers very effective microfinance ... and more ... the bank lends almost exclusively to Bangladeshi women. No assets whatsoever. Landless peasants. Day to day labor. Tenant farmers. They lend solely for small investment loans. They do not care what the investment is. They do not take any sort of collateral. None whatsoever. The loan document consists of 16 promises such as using clean water and keeping a tidy yard. Despite the credit profile of the clientele, the bank achieves a 97% loan completion rate. They do not employ collection agents or thugs.

The Bank has diversified into various productive and marketing ventures, ranging from providing sustainable and affordable solar power and biogas digesters , to recovering ancient ponds and reservoirs and establishing aquaculture ventures. These ventures in turn are now training women field technicians and fish farmers ... there are a wide range of ventures ... all commercial. all viable. The Bank does not obtain money from donations either domestically or from overseas. It is a self funding operation, returning an acceptable 8% profit to its shareholders.. The Bank is 92% owned by its customers and former customers. The remainder is owned by the government.

There are several reasons why the Bank works so well. One of them is that it is tailored to suit Bangladeshi conditions most carefully. Any model for Thailand would need to be similarly crafted. Custom made, as it were.

My investigations so far suggest that lending to co-ops for example has not proved effective over the longer term.. They tend to be only as effective and co-operative as the influence and involvement of the founders continues. Village politics, family spats, arguments about chickens ... they fall into disrepair.

But very very small scale, for specific types of investment, and achieving a range of social, health and say environmental, educational or other outcomes... whatever is considered important and central. To a very specific clientelle ... I do not know enough about the detail of Thai farmer culture to hazard any suggestions.

But I do know about farming and economics. And that is what I have been looking at. One of the key problems for Thai farmers I've been looking at in the NE is irrigation ... storage and distribution ... they get plenty of rain ... just clumpy distribution. And this pocket handkerchief farm size has turned this part of Thailand at least into a country of hobby farmers. .. 15 rai of paddies is no longer an economic proposition.... if it ever really was medium to long term. Thailand's farming solutions in part lie in questions of scale and achieving economies of scale... Also in some serious changes in its soil and water management at a landscape scale and at the farm scale.

But the vehicle for this sort of microfinance operation might not be with the hobby farmers. Or those who are just feeling the squeeze of declining farm productivity and subeconomic farm size. If it is like Bangladesh, the vehicle will be with the really poor and routinely hungry, I suspect. Where are significant numbers of families going seriously hungry in Thailand at the moment? Or seasonally? Where there is no off farm work? I would like to know this.

I would also appreciate any comments, suggestions advice etc you might throw into the pot....it is a very important topic and not just for Thai farmers.

Sunfarmer

Edited December 17, 2009 by Sunfarmer

[slapout]

Sunfarmer; your association with this type of bank loan system sounds interesting and glad to see it is working. You question of "where in Thailand are there really poor and routinely hungry?' From my observation it is not in the village/farming area with the exception of those areas where only1 crop/year is possible. Much of Thailand can get 2 and with preplanned land utilization even a 3rd crop. There is work for farm people (younger) in bigger cities/industrial areas etc to supplement the yearly income. As you pointed out, the farm size here is more hobby farm size but it seems to fulfill the immediate needs of many of the Thai's. I hope others can and will give their thoughts and experience on this as its a interesting concept.

[THAIPHUKET]

Sunfarmer,

I'm glad that you mention Grameen Bank, I was waiting for that

http://www.grameenfoundation.org/

I thought all along that such project MUST be possible in Thailand too. I always believed in the Grameen concept from day 1.

And this although I am a retired corporate banker. I refuse to believe that everyone is out to cheat.

What may be needed is a land reform as done by several developing countries, in order to avoid a further fragmentation of farm land. But this is a hot political potato to be avoided.

For the time being I'm happy to have been not proven wrong, got all my money back. Not that I'm getting cocky, will carefully think about my next step.

There is still the desire to comprehend the basic structur of Thai farming.