Improved access to credit urged

THE NATION

Kittipong Kittayarak

BANGKOK: -- Reducing people's dependence on loan sharks should be pushed on to the national agenda, experts agree, while urging relevant agencies to promote easier credit access in the formal banking sector.

Justice Ministry permanent secretary Kittipong Kittayarak told a seminar on "Informal Debt Crisis: Solutions for Thai Society" that loan sharking was an old problem that was difficult to solve. It is not just a question of poverty, but also about equality of income distribution.

The recent seminar was organised by the ministry.

Reducing indebtedness to underground lenders needs collaboration and integrated implementation by the public and private sectors and civil society, Kittipong said.

"First, income should be distributed fairly to narrow the gap [between rich and poor]. Second, disputes should be solved and knowledge should be provided so people have fast access [to legal remedies]. The informal-debt problem has become a national issue that involves several agencies."

Arjin Chotiwong, deputy senior inspector-general of the Royal Thai Police, conceded that despite extortionate interest rates, it was difficult to take legal action against loan sharks because of mutual agreements between lenders and borrowers.

The best solution is to allow people easier access to formal funding sources such as banks.

"Indebtedness comes from need for money. When a borrower is not able to repay, a lender does everything to get paid, and sometimes violence occurs. We suggest that public agencies coordinate with the complaint centre set up by the Royal Thai Police for the elimination of violent debt-collection gangs," Arjin said.

Sirirat Chumuppakan, director of the Provincial Affairs Bureau, said the Ministry of Internal Affairs had previously attempted to address the problem of loan-sharking at its roots.

First, he said, the causes of indebtedness must be studied and, second, debts must be prioritised. Third, a borrower's capability to repay his debts must be developed.

Fourth, the main sources of capital should be strengthened, and that means increasing income and reducing expenses. Fifth, additional funding sources, including village funds, should be established.

Finally, guarantees should be made for farmers and One Tambon One Product (Otop) goods should be promoted, Sirirat said.

Twatchai Yongkittikul, secretary-general of the Thai Bankers' Association, urged relevant agencies to help people understand the deceptions made by loan sharks. At the same time, people should not overspend and thereby find themselves needing to borrow.

Banks should lower interest rates to allow some people to get access to formal loans, he said.

"If we can get innocent people out of the informal-debt cycle, I think the problem will be reduced. There will remain a real indebted group. Informal lenders who do not have morality should be punished by laws," Twatchai said, suggesting that welfare should be provided for those in financial trouble.

Narong Phetprasert, an associate professor in the faculty of economics at Chulalongkorn University, said Thai society should transition away from populism into a welfare state. He urged the Ministry of Justice to work proactively to provide people knowledge about borrowing wisely.

"Unfair loan contracts can lead to informal debts. Is it possible for the Ministry of Justice to set up an agency to coach people on managing their borrowing?" Narong said.

-- The Nation 2013-01-12

It is indeed a big problem in Thailand...I've seen it happen to Thai friends and in-laws. And in all too many cases the loans are to pay gambling debts...a vice (gambling) leading to another problem (borrowing money from a loan shark). And from what I've seen, more women than men will go the loan shark route...not to imply plenty of men don't go the loan shark route.

It is indeed a big problem in Thailand...I've seen it happen to Thai friends and in-laws. And in all too many cases the loans are to pay gambling debts...a vice (gambling) leading to another problem (borrowing money from a loan shark). And from what I've seen, more women than men will go the loan shark route...not to imply plenty of men don't go the loan shark route.

Agree about loans to pay gambling debts.

My Thai son was put under lots of pressure at university by fellow students for loans.

He succumbed the first time, 5,000Bah,t supposedly for tuition fees, but was in fact to pay football gambling debts.

When very overdue for repayment son asked when the money would be returned. Response: ' why do you ask me for money, your not a very nice friend', and son then ignored.

Son never ever loaned money again.

It is indeed a big problem in Thailand...I've seen it happen to Thai friends and in-laws. And in all too many cases the loans are to pay gambling debts...a vice (gambling) leading to another problem (borrowing money from a loan shark). And from what I've seen, more women than men will go the loan shark route...not to imply plenty of men don't go the loan shark route.

Agree about loans to pay gambling debts.

My Thai son was put under lots of pressure at university by fellow students for loans.

He succumbed the first time, 5,000Bah,t supposedly for tuition fees, but was in fact to pay football gambling debts.

When very overdue for repayment son asked when the money would be returned. Response: ' why do you ask me for money, your not a very nice friend', and son then ignored.

Son never ever loaned money again.

Can understand exactly

But first of all why should banks wear the responsability, they have share holders & major running costs

Not like the loan sharks that charge a fortune & own 6 shops

I certainly now why your son was asked & very happy that he learnt a lesson straight away

My wife is always pressured & inlaws being the major ones but they & the others dont give a S*te, so one is left wondering as to who will really pay again in the end

Was in the car one day & they were talking in terms of 40,000 bht , so ime thinking here we go (from where)

Ive come to the concusion that they think foriegners are totaly Stupid

How about not lending money to people who can't afford to repay their loans? I don't see the difference between making individuals (loan sharks) rich and the banking sector (already rich businessmen/the government) rich. People should learn to live withing their means, rather than going into debt to make face. it's a cultural issue that needs to be addresses, not a money issue.

How about not lending money to people who can't afford to repay their loans? I don't see the difference between making individuals (loan sharks) rich and the banking sector (already rich businessmen/the government) rich. People should learn to live withing their means, rather than going into debt to make face. it's a cultural issue that needs to be addresses, not a money issue.

agreed 100%

the

"The best solution is to allow people easier access to formal funding sources such as banks."

is what got the US into the financial difficulties it is in now.

Thailand has enough problems with out that.

How about making it more difficult for loan sharks to operate. Set up a reward system for people who give specific names and information.

It's a problem everywhere. In other places it is disguised as pawn shops, payday lenders, whatever, who disguise their high interest rates by charging flat fees.

Education helps but there will always be those who are weak, gullible and/or stupid.

@scorecard My dad says if you lend a friend $20 and never see him again, you got off lightly. a valuable lesson in life learned at a reasonable cost.

It's a problem everywhere. In other places it is disguised as pawn shops, payday lenders, whatever, who disguise their high interest rates by charging flat fees.

Education helps but there will always be those who are weak, gullible and/or stupid.

@scorecard My dad says if you lend a friend $20 and never see him again, you got off lightly. a valuable lesson in life learned at a reasonable cost.

But in most "other places" the borrowers have some sort of collateral and/or jobs with regular payhecks or some sort of documentation.

This article is just bluster and puffing. The establishment doesn't care to solve this problem of Thai loan sharks and bookies. The police and Mr. Bigs get too much of a cut on the juice. The Thai farmers and country folk who do the borrowing often pledge land that may be held by the father or another sibling. The Chanote gets tied up for three generations attempting to buy it back and pass it around while they sky a loan. That is borrow from one shark to pay another.

When the shark discovers that the Chanote is not transferable to him, he rides into town and threatens to "expose" the entire family to being called out as dead beats and welshes on the juice. The family then scurries about cobbling together the money from generation to generation or friends and uncles or unsuspecting farang in order to "save face" in the village. As soon as money "is arranged" - the cycle repeats and they go borrow from another shark and the juice goes on for another 2-3 years until they scurry about again.

"First, income should be distributed fairly to narrow the gap [between rich and poor].

Shocking the pollies would never allow that.

Thought the Govt was giving out credit cards to farmers and taxi drivers thereby getting them in debt to the Govt then when the time came to make payments they would have to go to the loan sharks.

Not easily solved. Even the red light worker pay 20% a day to the motorcycle taxis whilst entertaining a john knowing they can get it back next day - if all goes well. Small amounts - can just see a sex worker asking a bank for a loan or structured debt with monthly repayments. They can't manage a bar bill, let alone a piece of plastic that ties them to debt eternally. The loan shark they understand, a piece of plastic does not compute...

Reduce the dependency by arresting and imprisoning the criminal leeches involved in this illegal activity.

Note for Thai government ministers and officials: Look up the words illegal, arrest and imprison in the Thai dictionary. They do exist, but obviously only on paper. (pun intended)

Whereas, the phrase, take meaningful action does not, obviously.

Edited January 12, 201313 yr by arthurboy

It is indeed a big problem in Thailand...I've seen it happen to Thai friends and in-laws. And in all too many cases the loans are to pay gambling debts...a vice (gambling) leading to another problem (borrowing money from a loan shark). And from what I've seen, more women than men will go the loan shark route...not to imply plenty of men don't go the loan shark route.

Agree about loans to pay gambling debts.

My Thai son was put under lots of pressure at university by fellow students for loans.

He succumbed the first time, 5,000Bah,t supposedly for tuition fees, but was in fact to pay football gambling debts.

When very overdue for repayment son asked when the money would be returned. Response: ' why do you ask me for money, your not a very nice friend', and son then ignored.

Son never ever loaned money again.

Sorry this happened.... but on the bright side, your son learned an important lesson for all of life in this experience...and for a fee (5,000) that would have been much more, if he had learned it from a similar bad experience later in life.

the system as a whole keeps the gold shops profitable .

With giving out credit cards to the farmers, I think the Government is loan sharks as well.

This article is just bluster and puffing. The establishment doesn't care to solve this problem of Thai loan sharks and bookies. The police and Mr. Bigs get too much of a cut on the juice. The Thai farmers and country folk who do the borrowing often pledge land that may be held by the father or another sibling. The Chanote gets tied up for three generations attempting to buy it back and pass it around while they sky a loan. That is borrow from one shark to pay another.

When the shark discovers that the Chanote is not transferable to him, he rides into town and threatens to "expose" the entire family to being called out as dead beats and welshes on the juice. The family then scurries about cobbling together the money from generation to generation or friends and uncles or unsuspecting farang in order to "save face" in the village. As soon as money "is arranged" - the cycle repeats and they go borrow from another shark and the juice goes on for another 2-3 years until they scurry about again.

Sadly all too true. Sometimes i wonder - if the extended family didn't exist, maybe the whole system would begin to crumble - but i wouldn't be holding my breath.

The fifth proposal, to establish village loan-funding schemes, caught my eye. Surely there already is a village-fund, which the new government gave extra funding to, and also that new womens-fund announced a couple of years ago ? Are these schemes not working properly ?

A major step forward, here as in many other countries, would be to educate pupils/adults more about budgeting & borrowing & simple-business & money-matters, if you're unable to save-up a deposit for a purchase then you're also unlikely to be able to afford the payments on a loan, especially at extortionate-rates !

But this would impact the profits of the loan-sharks or richer locals, and reduce their ability to scoop-up chanote-papers on land, let-alone the professional scamsters & fraundsters who prey unhindered upon the poor, so why should any politician wish to promote measures to reduce this ? Being as they're generally beneficiaries themselves.

Setting a maximum permitted rate (lower than 100% pa, say ?), might help to increase awareness, and reduce the number of people who are sucked into these schemes. But people currently do seem very willing to take-on unsustainable debt.

For example we live near a university and, about a term into each new year, students are always looking to 'hock' their new laptops & motorbikes, which were a start-of-college present from doting-parents. They invariably fail to make their payments, and lose the security, it's almost as though this is a socially-more-acceptable way of selling these things at a very-substantial discount ?

Even people running small businesses, who might have been thought/hoped to be more-financially-aware, seem to get into trouble ! And I won't start, on the number of new businesses which fold after a few months, having never been profitable or stood a chance in the first place !

Let's hope that, against history and the odds, the Justice Ministry can devise some effective way to curb predatory-lending to ignorant-borrowers.