Village Fund Success Stories Heard

[Lite Beer]

GOVT POLICY

Village fund success stories heard

Thanapat Kitjakosol

The Nation on Sunday

Loei farmer Prayuth Hipkaew, 55, credits the village fund and the Thai Chamber of Commerce

Farmer benefits from diversifying after borrowing

LOEI: -- In contrast to criticism from some quarters that the Thailand Village and Urban Revolving Fund encourages villagers to borrow and spend in an endless cycle of debt, success stories involving the scheme were heard last Thursday, including one from Loei farmer Prayuth Hipkaew.

The retired teacher, a resident of Phu Kradung district, recalled that he used to grow only rice on his five-rai plot, but would earn nothing in the off-season. So he studied the Thai Chamber of Commerce's "One Rai, One Hundred Thousand Baht to Financial Freedom" project and borrowed Bt30,000 from the village fund.

He divided his land into five parts allocated to rice and other wet-field crops; fish and frog raising; an area with a residence and bio-substance manufacturing facility; chicken and duck raising; and a herbal plant and vegetable patch. Nowadays he and his wife earn over Bt100,000 per year.

Prayuth said the Bt30,000 seed money created more income for his family. Each morning until 9am, they pick Tummy-wood plants to wholesale at Bt3 per handful, earning at least Bt9,000 a month or Bt108,000 a year, while they also sell eggs for Bt3,000 a month, he said.

The frog and fish ponds yield Bt30,000-40,000 a year, while other plants grown around the ponds yield an additional Bt10,000-12,000 a year, he said, so the family earns Bt185,500 a year totally, leaving Bt150,000 after expenses.

Prime Minister Yingluck Shinawatra presided over an event last Thursday marking the 10th anniversary of the Thailand Village and Urban Revolving Fund at Nonthaburi's Impact Muang Thong Thani. It was announced that the fund, with 79,255 village funds under it covering 12.8 million members, had generated Bt160 billion so far, while 1,500 community funds had been elevated to financial institution status.

In the fund's third phase next year the government would add Bt1 million to each of 21,624 qualified community funds, it was announced.

The village fund enabled villagers to invest in their vocations without borrowing from other money-lenders, while the approach of villages overseeing and managing the fund themselves promoted greater unity, said Chanon Nakprawit, a Chiang Krom Village Fund committee member from Udon Thani's Prajak Silapakhom district.

His village has bought a 2-rai plot on which to build a village fund office, which will open in December. Chanon said that with the additional money brought in by the fund, it would be as if the village had its own investment bank.

Namchai Chokwat from Lamchang Village Fund in Trang's Rassada district said villagers had learned to save and manage money systematically, although they struggled at first.

These days, they are able to stand on their feet because they have their own source of investment money in the village, he said, adding that the additional Bt1 million would boost liquidity and provide loans to members for use in expanding their activities.

-- The Nation 2012-10-28

[aussiebebe]

He's obviously a very clever guy, but, as a retired teacher I would hardly suppose he's representative of the average village fund recipient.

[ThaiFelix]

Anybody know what 'tummy wood' is?

[rubl]

I don't want to sound too negative here, but with THB 1,000,000 given to 78,000 villages there should be a few success stories.

[siampolee]

Certainly there have been and still are successful business ventures as a result of the village fund.However there are also many somewhat creative accounting practices that have seen money diverted to those with the right political and power base connections.

There are people who will work and succeed and all they need is that seed money, many others took the money and bought top end fashionable brand leading phones, televisions motorcycles and pickups etc, the result was a disaster.Financial discipline and honesty are the two key factors in the allocation of funds from Village Fund scheme.

Sad to say in many cases those two attributes have been missing honesty being the major casualty in the administration of the Village Fund scheme.

Edited October 28, 2012 by siampolee

[asiawatcher]

He's obviously a very clever guy, but, as a retired teacher I would hardly suppose he's representative of the average village fund recipient.

<deleted>' right mate. One success story (PR exercise) does not make the scheme a success in the hundreds of villages. In fact if they took each payout and each village data and measured the total number of successes I doubt it would even get into double digits as percentage with the balance of funds being misappropriated as always...

[MILT]

agreed! One to few success stories in each village can hardly represent a true success.

[NCFC]

In our Loei amphur the villagers have been learning how to grow strawberries, coffee, and fruit. And then learning how to add value by making jams,fruit juices, coffee-roasting in addition to their traditional rice growing. A whole range of local schemes are being put in place to help farmers generate extra income. The village fund is making a significant impact at local level.

[DeepInTheForest]

The bloviators are out in force in this thread-- no surprise. No evidence to back their assertions, either-- again, no surprise. Should we not provide evidence-based argument in this august forum?

The World Bank, that nest of dubious scoundrels, published a study of Thailand's village loan system titled "Appraising the Thailand Village Fund" (March, 2012).

http://papers.ssrn.c...ract_id=2022843

Here are some excerpts:

Data collected from households in the socio-economic surveys of 2004, 2009, and 2010 show an on-time loan recovery rate of about 93% (see Table 2); when late payments are factored in, 97-98% of the principal lent appears to have been recovered.

....An alternative view of elite capture is that favorable loans may flow disproportionately to the more affluent. The figures in Table 17 show that, compared to their peers, borrowers in the top quintile paid slightly lower interest rates (0.013 percentage points lower, not significant), borrowed larger loans (16% higher), and were slightly more likely to repay on time (0.2 percentage points higher). On the other hand, those in the top quintile only got an average of 0.13 loans per adult from the VF, compared to 0.48 loans per adult in the bottom quintile. Again, it is hard to see compelling evidence here of elite capture of the benefits of the VF loans.

Most VF committee members have no more than a high school diploma, but on average about one committee member has a university degree, and another member has some higher education (see Table 5). It is not uncommon for VF committees to include school teachers, or retired army officers. However, 30% of committees have no member with any higher education.

On average, VF committees have 1.5 members with experience in accounting, 2.4 with managerial expertise, and 1.1 with “banking experience” (see Table 5). This helps equip many VFs with the knowhow to manage funds and keep books, but it is noteworthy that 17% of VF committees had no member reporting any of these skills.

....One other variable stands out. Village Funds that have more well-educated committee members have less money to lend. This is unexpected; perhaps better-educated members are more willing to take risks, or less insistent on loans being repaid, or expect higher honoraria.

VF officers and committees frequently complain that they do not get as much support as they would like from the regional or central office. Most say they would like help with bookkeeping (87%), management (83%), assessing the creditworthiness of borrowers (68%), or for other matters (98%). The need for maintaining and upgrading skills can easily be overlooked in such a highly decentralized organization.

Readers can parse the document at the link above to draw their own conclusions.

I see that loans are being repaid, and there is little evidence of domination by well-educated elites to corral resources of the fund. The fund has been self-sustaining.

The only areas that the World Bank found to criticize were that the fund did not aggressively seek to expand its profits and increase its funding base. They thought that perhaps loan officers weren't being aggressive enough in taking risk. Higher-interest loans, they point out, would be more profitable, and could pay off the original investment.

Ugh.

All I can say is, in my view these are quibbles, and typical of World Bank thinking. They miss the point entirely. The village fund has been immensely popular because it provides a possible leg up, access to upgrades in equipment for small business, and a means to fund the entrepreneurial dreams of small loan-seekers. It has not gone underwater with bad loans; far to the contrary. And by the way, how has the system of extracting profit from loans gone in the World Bank's home region of the OECD countries (US and Europe) lately? Just asking.

I am certain there are downsides to the village loan system. Nevertheless, it seems like a net positive, unless someone can provide some compelling evidence otherwise.

I also think that posters who complain that only a few select villagers benefited are mistaken. The system seems to be widely popular. Like it or not-- and I am certainly no fan of Thaksin-- it was one reason that villagers often supported him strongly. The program had sufficient popularity that the Democrats made no move to dismantle it. That in itself is some sort of testimony to its success, I'm thinking.

http://www.telegraph...north-east.html

Edited October 29, 2012 by DeepInTheForest