Thai Household Debt

[linno2]

For those unware the village fund is a sum of money that is administered by the village headman where locals in that village can borrow a maximum amount that has very generous rates of interest and the repayment schedule quite flexible. It was one of Thaksins ideas to keep the rural poor as loyal voters and a major part of the reason why he is liked by them so much..

Creating liquidity is in principle a good thing as most farmers have difficulty borrowing from main stream banks - for many people they have ended up in a debt cycle that they cannot service for variouis reasons. There is a mad rush at the time of annual interest payments to borrow enough money to pay the interest! It is also another opportunity for some to exploit the situation if they are incontrol of the funds. Just wish the loans could have come with some credit counselling. Of course a parallel situation has occurred in Australia with credit card debt.

[Heng]

Yeah, they should read that well known credit counseling leaflet..... 'Spend less than you make.'

[farang000999]

The UK at least is now considering a helicopter drop of money, rather than engage in yet another round of questionable quantative easing, put the money directly into the hands of the consumer. In effect that is what Thailand is doing with its village funds, I note that another million has now been allocated to each village which means the rural poor can borrow twice as much, a good thing or a bad thing, unsure, probably a double edged sword.

For those unware the village fund is a sum of money that is administered by the village headman where locals in that village can borrow a maximum amount that has very generous rates of interest and the repayment schedule quite flexible. It was one of Thaksins ideas to keep the rural poor as loyal voters and a major part of the reason why he is liked by them so much..

It depends who is administrating the helicopter drop doesn't it? If it is the government, it has a much better chance of working. If it is the Central Bank operating under some kind of loophole, it will likely be received as unlawful and undemocratic. Who would want to sell up hard assets for paper money dumped from the sky by an unelected body? How much more will they dump next month?

[nong38]

Ok I will let you all into a secret of what happened to me 18 months ago, maybe this open a few doors but certainly not all. Girl who I know comes up wants to borrow 10,000bts, sorry no have! Just till I get the money from the Bank. Wants to pay me 500 bts a month. With my western ways I am thinking 10,000 bts at 500 bts will take 2 years, bit of risk no thanks! Thats our western thinking. I told her 1000bts and that was that. end of story.

I did not understand, Thai thinking is on a different planet

This is the way it works, if you are not with a money lender.

You want to borrow 10000bts ok, your repayments are 1000bts a month, ok? Ok? HOw much does the borrower get?

Not 10000bts but 9000bts ( you deduct the 1st payment ). Then every month on repay day the borrower has a choice, repay the full loan or 1000bts. Now you can work out the figures, dont get involved.

There are many Thai schemes and manu moonlighters.

[BigJohnnyBKK]

It depends who is administrating the helicopter drop doesn't it? If it is the government, it has a much better chance of working. If it is the Central Bank operating under some kind of loophole, it will likely be received as unlawful and undemocratic. Who would want to sell up hard assets for paper money dumped from the sky by an unelected body? How much more will they dump next month?

A social credit guy eh?

[CPH]

One thing I do not think has been mentioned is that Government employees (teachers, police, military etc) can borrow money from the state at a very low interest rate.

[Farma]

CPH i think you might be referring to a credit union. The credit unions for teachers, police, etc operate in each province offering low interest rate loans.

Each member buys shares in the credit union which then allows them to borrow greater amounts. Repayments are deducted from their salaries and must be fully repaid before they leave the service. The loans can be transferred to other provinces credit union with prior approval if the member moves employment to a new province.

Each year a dividend is paid to each member depending on the amount of shares they own in the credit union. The dividends give a better return than banks and loan interest is a lot lower than the average bank rate. A credit union i'm familiar with paid their dividends a few weeks ago and I know of members who recieved dividends of up to B400k for the year. The person who recieved the 400k obviously owns a lot of shares.

[jaideeguy]

when you have a culture that is mostly living hand to mouth and corporate retail shops offering a 800thb rice cooker for time payments at outrageous interest rates, you have a recipe for financial disaster.

[chiangmaikelly]

CPH i think you might be referring to a credit union. The credit unions for teachers, police, etc operate in each province offering low interest rate loans.

Each member buys shares in the credit union which then allows them to borrow greater amounts. Repayments are deducted from their salaries and must be fully repaid before they leave the service. The loans can be transferred to other provinces credit union with prior approval if the member moves employment to a new province.

Each year a dividend is paid to each member depending on the amount of shares they own in the credit union. The dividends give a better return than banks and loan interest is a lot lower than the average bank rate. A credit union i'm familiar with paid their dividends a few weeks ago and I know of members who recieved dividends of up to B400k for the year. The person who recieved the 400k obviously owns a lot of shares.

Are you talking about the Share system or an actual bank like in a building with a sign that says credit union?

[Farma]

These credit unions are run from dedicated offices usually in the ministrys provincial HQ. They are actual credit unions for the police etc with department staff operating the credit union. The credit union board members ie secretary. loans officer etc are voted in by the members each year. Members apply for loans which are then vetted by board members prior to approval.

[nong38]

One of the mindsets here in THailand, I think might be this. "Live for today, today is REAL, tomorrow may never come." Which would help to understand all that impulse purchasing of things that we lived without only yesterday, trolley loads leaving the supermarket, a whole month's money gone in one visit!?

Oh to be a fly on the wall, even if we cannot understand the language to well!

[chiangmaikelly]

One of the mindsets here in THailand, I think might be this. "Live for today, today is REAL, tomorrow may never come." Which would help to understand all that impulse purchasing of things that we lived without only yesterday, trolley loads leaving the supermarket, a whole month's money gone in one visit!?

Oh to be a fly on the wall, even if we cannot understand the language to well!

Check out the map

http://maps.worldbank.org/eap/thailand

The world bank may not agree with you.

[BigJohnnyBKK]

I am no longer boggled by your lack of knowledge. Home prices dropped, lowering the net worth of Americans.

See if you can understand this. Try to follow. Before the housing drop, my home appraised for US$750k according to the county tax rolls. Last year it had dropped to $520k by the same source.

Now pay attention. I can sell my home for $510,000 and then use the money to buy another house for $510,000 which also was worth $750k just a few years ago. NOW tell me, what did I lose really? Nothing at all. My home will still buy an identical home.

The other issue is that it's my home. $1 or $1 million dollars, it's the same place to live.

I do use the US model and crash as a predictor for LOS, but then you don't think that's possible. 1997 didn't happen either.

As for any world bank figures, they are looking at LOS on average but the government and those in power are corrupt. Any growth goes into the pockets of the few, but not to those in the villages. Much of Thailand is still in poverty.

For those that saw real estate as a stored value for their retirement funds, and those affected by the ripple effects, stockholders of financial companies, people who lost their jobs etc etc pretty big impact there.

And your last paragraph applies just as much to the US as it does to Thailand.

[StreetCowboy]

...When you can write without flaming. You wrote, "I am no longer boggled by your lack of knowledge. See if you can understand this. Try to follow. Now pay attention." We can have a conversation. Until then maybe someone else can tell you what the difference between a half a million and three quarters of a million in the bank is.

It's not in the bank, it's in the house. Bricks and mortar. Safe as houses etc.

The biggest problem with declining property values is the constraint on mobility - the difficulty of transferring one's negative equity to a new property.

Howrever, for first-time buyers, declining property values are a boon.

Personally, I'd rather people invested their surplus wealth in more productive assets that create more employment, rather than speculatively driving first-time buyers out of the market.

SC

[metisdead]

Once again the topic has gone way off topic, a bunch of off topic posts and replies have been removed, again. Topic is about Thai Household Debt.

[nong38]

If the banking system colapses, no matter what anyone thi nks of Banks, we will all have a problem.

I believe the OP asked about household debt in Thailand, so we have been in the doldrums for a while!

Young factory workers on new motorbikes, rather than second hand ones, mmmmmmmmmmm female easy answer, can she keep her legs closed? Or, applying to both sexes do theyjust have to make a statement with money like they have never seen before and did not do the sums before they went into the shop? Perhaps, because we are older, we have the benefit of experience is financial matters to a degree,but, you know what I always knew how much my income was and expenditure must not exceed that, here it seems teaching people how to keep chickens has a priority!

[BigJohnnyBKK]

Plus the fact that cultural matters, e.g. the much tighter economic integration of responsibility within a much wider extended family network, the much harsher legal penalties for default, the much more cautious requirements of the banks etc.

Which combine IMO in even the same relative levels of debt to income at the level of an individual household much less riskier than it would be in the west.

Many people default at the drop of a hat back home, just to protect their other assets. Here most would rather die than lose face, and in many families their wealthier relatives even if not co-signers can trust that they're good for it long-term and would step in to help out.

[Rimmer]

Off topic post removed

[nong38]

One of the mindsets here in THailand, I think might be this. "Live for today, today is REAL, tomorrow may never come." Which would help to understand all that impulse purchasing of things that we lived without only yesterday, trolley loads leaving the supermarket, a whole month's money gone in one visit!?

Oh to be a fly on the wall, even if we cannot understand the language to well!

Check out the map

http://maps.worldbank.org/eap/thailand

The world bank may not agree with you.

I doubt if the world bank has much of insight into the Thai phsyci anymore that many Thais have heard of the World Bank! Things work differently here and I was suggesting a possibility.

When I was in the UK probably in the 90's had a cousin who had a business selling fixtures and fittings, his usualy suppliers were getting expensive and decided to try China. He had been used to asking the question how much do they cost? Then you can work out a selling price. The Chinese asked him how much he wanted to pay? A new question not heard before! Depending on how much you paid resulted in the quality, a mindshift, suddenly a new way of doing business.

There is I am sure a lot we dont understand, but think we do, about how Thai finances work, if only we knew what question to ask!

[thaibeachlovers]

One of the mindsets here in THailand, I think might be this. "Live for today, today is REAL, tomorrow may never come." Which would help to understand all that impulse purchasing of things that we lived without only yesterday, trolley loads leaving the supermarket, a whole month's money gone in one visit!?

Oh to be a fly on the wall, even if we cannot understand the language to well!

Check out the map

http://maps.worldbank.org/eap/thailand

The world bank may not agree with you.

I doubt if the world bank has much of insight into the Thai phsyci anymore that many Thais have heard of the World Bank! Things work differently here and I was suggesting a possibility.

When I was in the UK probably in the 90's had a cousin who had a business selling fixtures and fittings, his usualy suppliers were getting expensive and decided to try China. He had been used to asking the question how much do they cost? Then you can work out a selling price. The Chinese asked him how much he wanted to pay? A new question not heard before! Depending on how much you paid resulted in the quality, a mindshift, suddenly a new way of doing business.

There is I am sure a lot we dont understand, but think we do, about how Thai finances work, if only we knew what question to ask!

<Depending on how much you paid resulted in the quality>

Oh, now I understand why everything I buy that was made in China is rubbish!

Unfortunately, decent stuff in Thailand costs as much as back home.

[connda]

I've replied once, and I still don't get. it. I live in Northern Thailand out in the middle of a mountain valley where the primary crops are rice, corn, lumyai, and dairy cattle. And yet, I'm just amazed by the shear number of cars and trucks that I know that are in the 700K to 1.2M baht range driving around the villages out here.

Now, most of these folks are either working in factories (40K away from the villages) or strictly farming.

Most of these folks earn under 20K a month, probably less. But here they are driving in cars that I personally would not drive even if I was offered the financing. My 20 year old Toyota gets me from point a to point b very reliably, and I don't give a flying fling at at donut hole about status, so I'm quite happy with my car. What I can afford to drive and what I drive are in two different worlds. I spend by baht elsewhere.

So no -- I don't get it.

What I think may be happening is there is a huge market it selling new vehicle to under-qualified buyers and then a fairly efficient repossession business, followed by second-hand resales to under-qualified buyers, and on, and on, and on.......you get my drift?

At some point, the Thai banks will be screaming for a government bailout like the US banks did in the 2008 mortgage bust, then turn on the Thai Baht printing presses. But I think it has a way to go...maybe? Just depends if the US and the EU self-implode prior to a robust domestic market being implemented. The chickens will come home to roost.

[chiangmaikelly]

I've replied once, and I still don't get. it. I live in Northern Thailand out in the middle of a mountain valley where the primary crops are rice, corn, lumyai, and dairy cattle. And yet, I'm just amazed by the shear number of cars and trucks that I know that are in the 700K to 1.2M baht range driving around the villages out here.

Now, most of these folks are either working in factories (40K away from the villages) or strictly farming.

Most of these folks earn under 20K a month, probably less. But here they are driving in cars that I personally would not drive even if I was offered the financing. My 20 year old Toyota gets me from point a to point b very reliably, and I don't give a flying fling at at donut hole about status, so I'm quite happy with my car. What I can afford to drive and what I drive are in two different worlds. I spend by baht elsewhere.

So no -- I don't get it.

What I think may be happening is there is a huge market it selling new vehicle to under-qualified buyers and then a fairly efficient repossession business, followed by second-hand resales to under-qualified buyers, and on, and on, and on.......you get my drift?

At some point, the Thai banks will be screaming for a government bailout like the US banks did in the 2008 mortgage bust, then turn on the Thai Baht printing presses. But I think it has a way to go...maybe? Just depends if the US and the EU self-implode prior to a robust domestic market being implemented. The chickens will come home to roost.

I've replied once, and I still don't get. it. I live in Northern Thailand out in the middle of a mountain valley where the primary crops are rice, corn, lumyai, and dairy cattle. And yet, I'm just amazed by the shear number of cars and trucks that I know that are in the 700K to 1.2M baht range driving around the villages out here.

Now, most of these folks are either working in factories (40K away from the villages) or strictly farming.

Most of these folks earn under 20K a month, probably less. But here they are driving in cars that I personally would not drive even if I was offered the financing. My 20 year old Toyota gets me from point a to point b very reliably, and I don't give a flying fling at at donut hole about status, so I'm quite happy with my car. What I can afford to drive and what I drive are in two different worlds. I spend by baht elsewhere.

So no -- I don't get it.

What I think may be happening is there is a huge market it selling new vehicle to under-qualified buyers and then a fairly efficient repossession business, followed by second-hand resales to under-qualified buyers, and on, and on, and on.......you get my drift?

At some point, the Thai banks will be screaming for a government bailout like the US banks did in the 2008 mortgage bust, then turn on the Thai Baht printing presses. But I think it has a way to go...maybe? Just depends if the US and the EU self-implode prior to a robust domestic market being implemented. The chickens will come home to roost.

I would explain it to you but any discussion about the US debt crisis will be deleted so we can't go there. To put your mind at ease you might want to go to a bank that speaks English and ask them about the qualifications for getting a loan on a car. I know that is not as much fun as dreaming about disaster scenarios for Thailand but it would be more accurate.

[Heng]

This thread is like a debate between French generals on how they 'don't get' how the Viet Minh got their artillery up the surrounding mountains.

[chiangmaikelly]

This thread is like a debate between French generals on how they 'don't get' how the Viet Minh got their artillery up the surrounding mountains.

Although I can see the similarities I think it may be more like discussing if one should ban Christmas in the West because the poor people don't have enough money to buy presents for their starving children.

[thaibeachlovers]

This thread is like a debate between French generals on how they 'don't get' how the Viet Minh got their artillery up the surrounding mountains.

Although I can see the similarities I think it may be more like discussing if one should ban Christmas in the West because the poor people don't have enough money to buy presents for their starving children.

Believe it or not, that sort of argument is indeed heard in the US.

[chiangmaikelly]

This thread is like a debate between French generals on how they 'don't get' how the Viet Minh got their artillery up the surrounding mountains.

Although I can see the similarities I think it may be more like discussing if one should ban Christmas in the West because the poor people don't have enough money to buy presents for their starving children.

Believe it or not, that sort of argument is indeed heard in the US.

You are right. I don't believe it.

[thaibeachlovers]

This thread is like a debate between French generals on how they 'don't get' how the Viet Minh got their artillery up the surrounding mountains.

Although I can see the similarities I think it may be more like discussing if one should ban Christmas in the West because the poor people don't have enough money to buy presents for their starving children.

Believe it or not, that sort of argument is indeed heard in the US.

You are right. I don't believe it.

It's all part of the current excessive PC that is blighting the US along with other western countries. However, I would agree that with 47 million people on foodstamps in the US, none are actually starving.

[Heng]

Animals at the zoo don't starve either. Wouldn't call it much of a life though.

[thaibeachlovers]

Animals at the zoo don't starve either. Wouldn't call it much of a life though.

True, though is having a place to sleep and enough food not to have to go and hunt it, better than being "free". That's a moral conundrum I face everytime I see my hamsters run endlessly on their wheel.

[blowin]

I am Irish so I know all about dept and property bubbles. I am just back from South Thailand where we own a Durian farm. I could not get over the amount of new pick ups I mean nearly every second one was band new! But in saying that there is big money being made in farming oil palm ,rubber and Durian that is if you own your own land. But where I see the bubble is in land and property it is just going up up up. My wife bought a rai 4 years ago for 100k this land is now worth 600k and this land has no chanoute. The cash rich people from Samui are driving the prices up and they have the cash to do it but it will coming crashing down like it did here.