Loan sharking and debt: A vicious cycle in Thailand with no foreseeable solutions

webfact · July 23, 2014

Loan sharking and debt: A vicious cycle in Thailand with no foreseeable solutions

BANGKOK, 23 July 2014 (NNT) - Household debt problems in Thailand are starting to have a serious impact on the economy, resulting in more and more people having to turn to loan sharks to make ends meet.

For this reason, the National Council for Peace and Order (NCPO) has cooperated with relevant agencies to find a way to help tackle this problem. Some debtors have even committed suicide, as they were unable to pay back their loans or frightened by loan sharks’ violent debt claims.

The Bank of Thailand (BOT) has reported that the total household debt now stands at 9.79 trillion baht or 82.3 percent of the country’s GDP, which is a rather worrying statistic.

Meanwhile, the National Credit Bureau (NCB) of Thailand also reported that at least 1.1 million borrowers are starting to fall behind on their debt payments during the first quarter of 2014. Compared to last year, only 850,000 of them had trouble repaying their loans.

Unsurprisingly, these are some reasons that most people, especially low-income earners, turn to informal lenders to make ends meet. Should debt problems prolong, then Thais would be trapped in a vicious cycle of debt where there would be no foreseeable solution to resolve this problem.

-- NNT 2014-07-23

ratcatcher · July 23, 2014

Thais, just like other nationalities, all have great expectations. No forward planning, just "I want it and I want it now".

Tomorrow never comes.

NongKhaiKid · July 23, 2014

I received a news text today indicating that more bank loans are to be made available to farmers to get them out of the hands of loan sharks.

Whilst the interest rates will be a lower a loan is still a loan and has to be repaid one way or another and I find it hard to believe that farmers and their families taking these loans will still not use their friendly neighbourhood loan sharks.

It would be interesting to hear from members who have farmers in their extended family.

laolover88 · July 23, 2014

Big problem here is lack of Equity/Security except in Land.......I have 200 page bookhere from Kasikorn Bank of house/land for sale or at auction...and it is mostly hardly 'prime'

Wife won't touch it! Land in the centre of town or on the banks of the Mekhong close to a bridge.......that's it!!

Does the bank repossess i-phones?

worgeordie · July 23, 2014

Anyone who takes loans from loan sharks,must be very desperate or stupid,most likely

both,if they are in debit because they dont know how to budget their finances they have

no hope of ever paying the debit off,the rates and added charges these scum charge

is just too great.

I know several families that go into massive debit,to pay for funeral costs for a loved one,

leaving them in debit which they will never be able to pay off, all because of saving face,

in the community.

regards worgeordie

terryp · July 23, 2014

increasing VAT and a sugar, lubricants SIN tax...next year wont really help will it DUHHH!

chotthee · July 23, 2014

Gen Prayuth will make the sharks history.

Any one care for some soup?

catweazle · July 23, 2014

As long as media, public figures, etc. feed the people this "Enjoy now, pay later!" philosophy, it's no wonder that everyone gets in debt. The true reason why those "on top" dislike the loan sharks is that the cash, gold and property gained will not end up in the banks' of portfolios, where it should. Anyone who believes that banks are in the game for the interest is a fool, because all they want is your property - real value and not digits in a computer. Wakie, wakie!!!!!

Don't get me wrong - I have nothing but disgust for loan sharks and their cronies, the "Muak Gun Nok" riding around as a couple with their long sleeve shirts, jeans, gloves, full face helmets and money belt. I'm always tempted to ram them into the ditch whenever I see them...

Edited July 23, 2014 by catweazle

jaltsc · July 23, 2014

" Household debt problems in Thailand are starting to have a serious impact on the economy, resulting in more and more people having to turn to loan sharks to make ends meet."

It's a world wide phenomenon. People buy things they can't afford in order to impress people they don't even like.

It's all about face/Keeping up with the Joneses. Historically, if your neighbor had 2 pigs, then you needed to get a second pig. so people wouldn't think lesser of you. Now, it's about cars, bigger shops,etc. which ups the ante. If a bank won't give you a loan, that should be the first hint that you can't afford it. If the bank gives you a loan and you don't pay, you lose your collateral. If you don't pay the loan shark, you lose your ability to walk for 6 months.

Somehow it is much easier to obtain dollars than it is to gain sense.

Edited July 23, 2014 by jaltsc

UbonRatch · July 23, 2014

"The Bank of Thailand (BOT) has reported that the total household debt now stands at 9.79 trillion baht or 82.3 percent of the country’s GDP, which is a rather worrying statistic."

I'd like to know why that's a worrying statistic. Most Western countries average circa 80% also. In fact, most Scandinavian countries top 90%, with Finland often crossing the 100% boundary.

Inability to pay back is the stat that matters most, and we've all maintained that all the borrowing to get the new Isuzu etc. would blow up. Here it comes, and it's been coming for many years. lending by banks will simply further crucify the banks, and thus the economy. Time to buy all the gold you can!

givenall · July 23, 2014

No sympathy from me. want everything but don't want to work for just give me give me

Also no one can say there are no opportunity here, because there are a lot, just look at the Chinese docents

Ragzilb · July 23, 2014

the worlds financial system is not broken, its made that way.

UbonRatch · July 23, 2014

You got any kids?

dreaming · July 23, 2014

It's all about keeping up with the joneses.

A year ago I told my girlfriend I would buy her a secondhand motorbike so she can get around the village etc. She wasn't interested because it was secondhand. She would lose face. So I didn't buy it

Now, after having no motorbike she keeps suggesting a secondhand one might actually be a good idea. She has got over the whole giving a damn what the neighbours think. 555

ramrod711 · July 23, 2014

The Bank of Thailand (BOT) has reported that the total household debt now stands at 9.79 trillion baht or 82.3 percent of the countrys GDP, which is a rather worrying statistic.

Nothing to worry about in the Shin clan, money is rolling in. I think what is needed here is a first car, or first house scheme, that will stimulate the economy.....no really, I promise.

gemini81 · July 23, 2014

You sound brilliant; almost as much as Chinese 'docents.'

ratcatcher · July 23, 2014

Have you never met a decent docent of Chinese descent?

djjamie · July 23, 2014

One main disaster that exacerbated the effects and proliferation of loan sharks in Thailand was the "one village" fund.

It was supposed to be used as a tool to reduce loan sharks. Nevertheless the need for borrowers to pay back their loans quickly (within a year) to the government after receiving loans from the fund caused borrowers to look to loan sharks for more loans to pay back previous loans. Although most households did pay back loans, they did so by borrowing from other sources. They even borrowed from the fund to pay back other debts by loan sharks which was not its intended purpose.

This can be reinforced by looking at household debt which had gone up almost 100 percent from 2000 to 2004. It significantly increased from 68,405 Baht in 2000 (before the village fund was implemented) to 110,133 Baht in the first quarter of 2004. (3 years into the village funds implementation) As other have stated when this village fund is mixed into the recipe with a dash of "saving face" with the new car or motorbike purchase these figures are of no surprise.

The scheme has been red flagged by the Junta actually who have recognized the financial destruction it has inflicted on the poor and are currently scrutinizing it to ensure the people are not crippled under perpetual debt which is now standing at 160 000 baht per household.

Edited July 23, 2014 by djjamie

Pib · July 23, 2014

Well, when that new iPhone comes out I think it's mandatory to buy it (even if you haven't paid off last year's model). Otherwise, you could lose face among your peers.

Jeremy50 · July 23, 2014

You plan ahead for kids. If you can't afford them don't have them. Having kids isn't a right, it's a privilege. Why does everyone think that life isn't complete without children?

upena · July 23, 2014

Precisely what the Thai Government wants of its people - uneducated and deep in debt

belg · July 23, 2014

mmhh... nothing to do with the first car scam and others? for face buying cars & others you can really not afford ?

karma ?

gemini81 · July 23, 2014

Because reproduction is a basic instinct. If your mother didn't think along those lines, you wouldn't have the privilege of a thai visa membership to be pissed off about human reproduction.

wgdanson · July 23, 2014

Hi Gemini81. It's not reproduction that's basic, it's bumpsing.! Get that willy covered man.

VINCENT2012 · July 23, 2014

well i understand that poor want to look like rich but the rich make it easy for them to get poorer with more debt selling their stupid product.(to me of course, too conservative perhaps but not stupid)

the repetitive publicity on tv thai is making his job and the sheep follow .....thats it.

question:

what does a 12 years old child from country side do with a smartphone last generation (10 000 baths), when the entire family has 6000 baths for leaving.?

why people buy new car or a tractor in 5 years time or more paying the double of the price at the end ?

they want the people to consum and consume because the economy is based on that, but the results will be a recession at the end and a catastrophe like everywhere else.

europe or america today is an example!

i am still amazed in my village there is lots of people who never go to a market, just because they dont need their salad or fruit full of quimical,they eat what they find fish or kill and thats it, and they are very healthy beleive me.

i dont think our society based in consum is a good way of life.

we destroy the sea, we destroy our clean water, we destroy our air, we destroy our land and all this.........for money, i think the world is creasy and one day the humanity will pay for all what they did.....i dont think i will see it , i will be glad to be dead by then.

shanahan · July 23, 2014

Knock out the loan sharks with a dob in a loan shark hotline. If the authorities are able to shutdown the dobbed in loan shark, then the debts are then void. That's fantasy and wishful thinking I guess.

emilymat · July 23, 2014

That's really interesting and I applaud you stance.

Two things that show how 'wonky' things are.

1 When I wanted to sell my house a couple of years ago, a Thai couple came to view and liked it very much. But they wanted a knockdown price and the guy said to me "You must understand this house is second hand and not new". (Three years old).

When I took my thai wife to England I showed her a country house in Worcestershire that was on the market for half a million pounds. When I told her it was nearly 300 years old she said 'why would anyone want a house that old?'

2 When I was in the market for a second hand car a golf friend said his wife wanted to sell her car. I met her later and she said she wanted 170,000 baht. I asked her how long she had had it and she said two years, and she paid 150,000 but had spent 20,000 on routine repairs. Didn't buy!

So houses depreciate and cars appreciate.

bronco10250 · July 23, 2014

Thanx! I just wanted to put a not, but you said it all :-)

Ad Thai debt culture: Its actually everywhere the same, but with one major difference that in developed countries there are more channels for the (working) poor to get some funds than to approach loan sharks. In addition such countries provide counseling and programs to the people and, of course, trainings provided by NGOs a/o gov agencies to teach people to get along with their income!

bronco10250 · July 23, 2014

Thanx! I just wanted to put a not, but you said it all :-)

Ad Thai debt culture: Its actually everywhere the same, but with one major difference that in developed countries there are more channels for the (working) poor to get some funds than to approach loan sharks. In addition such countries provide counseling and programs to the people and, of course, trainings provided by NGOs a/o gov agencies to teach people to get along with their income!

bronco10250 · July 23, 2014

Its a vicious cycle. At least for the so called working poor who can just affort their basic needs. But its also a system behind, called Capitalism which is promoting a debt/loan/interest culture coz thats the way it works!

Sometimes I really scratch my head about those who get a loan about 20k and need to payback with 15, or more % per month!?

How dump, or better desperate you must be to do such things?

Edited July 23, 2014 by bronco10250

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