Low income, access to funding key to tackle household debt: BOT chief

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BOT SYMPOSIUM
Low income, access to funding key to tackle household debt: BOT chief
Erich Parpart
The Nation


Prasarn Trairatvorakul, governor of the Bank of Thailand, speaks at the opening of the

BANGKOK: -- Underground loans and high household debt cannot be tackled by debt-easing measures alone, as they do not address the root problems of low income and little access to financial sources, Prasarn Trairatvorakul, governor of the Bank of Thailand, said yesterday.

Measures such as lower interest rates and micro finance can enhance a borrower's ability to pay off liabilities temporarily.

However, dealing with the core problems require job creation, fairer wealth distribution and knowledge on how to save more to better manage financial obligations, he told the "2014 BOT Symposium".

Small and medium enterprises and low-income households face the biggest barrier as only 41 per cent out of the 2.7 million SMEs and less than 40 per cent of low income households could gain access to financing last year.

Charl Kengchon, managing director of Kasikorn Research, said that there had been improvements to financial access for SMEs and low income households since the 1997 financial crisis, following changes and improvements to commercial banking regulations and technology. However, there is still a need to find a way to encourage grassroots people to use formal instead of informal loans.

Banks will also need to improve their services and loan conditions to better suit this type of customer.

Interest rates do not pose an obstacle to financial access. The lack of information on customers and the high cost and lack of ability to seek and provide micro loans are more of a stumbling block, he added.

Wrongly encouraged

Prasarn said that in terms of government involvement, the previous populist policy that distorted the prices of agriculture products had wrongly encouraged a huge number of people - about 700,000 last year - to join the agriculture sector. However, now that prices of the world's crops have dropped, it has caused a host of financial problems for all those people.

The current government stimulus measure, which aims to provide a direct cash subsidy to farmers, is suitable for the short-term but "you cannot keep on taking painkillers for the rest of your life".

The current level of household debt at 83 per cent of gross domestic product (GDP) is not worrisome and the expansion of household debt began to slow down in the middle of last year.

However, the economic slowdown at the beginning of this year has made the problem appear to have worsened when in reality it is actually slowing down, he said.

Charl predicts that household debt would increase to about 86-87 per cent next year, assuming GDP growth of 4.8 per cent.

That level is not scary, as it has not crossed the 100-per-cent danger zone and is still manageable compared to countries such as Malaysia, 86 per cent, and South Korea, 90 per cent.

Source: http://www.nationmultimedia.com/business/Low-income-access-to-funding-key-to-tackle-househo-30245616.html


-- The Nation 2014-10-17

[Commerce]

They could do with starting with lessons that one spends within one's means, and can't have everything everybody else has simply because you want one, and they have one - like a brand new SUV - when you can get a perfectly reasonanble and cheap one for 1/3 of the price.

[Chris Lawrence]

I wonder if Prasarn Trairatvorakul, governor of the Bank of Thailand read the article below;

http://www.thaivisa.com/forum/topic/768888-thai-revenue-collection-for-fiscal-2014-below-target/?utm_source=newsletter-20141017-0651&utm_medium=email&utm_campaign=news

Revenue is down.

The other point is whether the Bank has the capacity to provide social responsible programs or advise on such programs.

Banks are more inclined to seek an increase in disposable income so the households can pay the high level of debt. They would also be trying to oust loan sharks and improve product so it is more accessible to all Thais.

So, I question if the Governor of the Bank of Thailand is to be a sole regulator for ways to improve household debt?

[worgeordie]

iPhone,iWant,must have now,People are up to their eyes in debit,

so they are going to give them access to more loans !,keep the

poor.poor,seems to be the mantra,they need to educate them,

you cannot spend more than you earn.

Back in Issan,families are going into big debit over funeral expenses,

they borrow money of loan sharks,to have a big funeral,for the sake

of face,most are just paying interest,if at all, so they will never get

out of the debit spiral, that goes for weddings too.

regards Worgeordie

[Ozziepat]

This is not difficult. Just do something similar to what others have done most recently in an attempt to prop up the Euro: Create an ex-systemic "bad" bank. "Capitalize" it with government good will. It can then either make zero-interest long-term bad loans directly, or guarantees unlimited bad-debt relief to "good" banks so they can continue to operate within regulatory guidelines. Don't subject the "bad" bank to normal reserve or reporting guidelines, don't call it a "bad" bank in public, and never ever mention inflation, welfare, populism or cronyism in related PR releases. This also provides a great way to get around difficulties with direct subsidies and price controls after ASEAN kicks in next year and Thailand has to pretend to play nice.

[elgordo38]

Well the banks could start charging us savers to park our money with them so that people that do not know how to handle money can borrow our money at ridiculously low rates. You know the people that want it all now. These same people when their work life is over will still owe money and have no pensions or savings. Forget about your kids looking after you they will be too busying paying off bank loans as they no doubt learned about life watching you. Governments world wide are fostering this type of thinking. Borrow, borrow borrow buy all the goodies you want now so the rich that produce it get richer. My old grandmothers bank was under the living room rug and she never locked her doors when she went out. She grew her own food and never took a pension till after age 75 (she was eligible at age 65) because she kept insisting she did nothing to earn this money. Sadly this type of thinking has long disappeared and we now have a entitlement mentality. I have been a saver all my life because I learned from her but my savings are being crushed by low interest rates so that people that do not know how to handle money can have cheap access to it. My pension cost of living increases are being artificially manipulated by a government who constantly throws items out of the cost of living basket when they esculate in price. My pension increase last year was less than 2% yet anyone that buys the necessities of life knows that living costs are increasing at 5 or 6 % or more annually. We live in a world of lies and manipulation by those we trust to govern us.

[rickirs]

I agree with Charl that the current level of household debt at 83 per cent of gross domestic product (GDP) is not worrisome so long as the GDP continues to have moderate growth (4%-5%) in 2015. Bank loan interest rates would remain fixed while money becomes more plentiful through higher employment wages, business growth, and access to capital that can service debt.

However, if GDP growth is zero or minimal (<2%) in 2015, Gen. Prayut’s House of Cards will collapse. Seeing as the predictions for 2015 are already anticipating a lower than expected growth rate, subsidizing household debt as a short-term solution in 2014 will have little positive impact on the economy in 2015. The government would be better served to concentrate on increasing exports and decreasing energy imports for 2015. Ironically, this was the same strategy of the Yingluck administration.

[carstenp]

I agree with Charl that the current level of household debt at 83 per cent of gross domestic product (GDP) is not worrisome so long as the GDP continues to have moderate growth (4%-5%) in 2015. Bank loan interest rates would remain fixed while money becomes more plentiful through higher employment wages, business growth, and access to capital that can service debt.

However, if GDP growth is zero or minimal (<2%) in 2015, Gen. Prayuts House of Cards will collapse. Seeing as the predictions for 2015 are already anticipating a lower than expected growth rate, subsidizing household debt as a short-term solution in 2014 will have little positive impact on the economy in 2015. The government would be better served to concentrate on increasing exports and decreasing energy imports for 2015. Ironically, this was the same strategy of the Yingluck administration.

I agree with you to.

But still I see many borrow money from the bank, to a car, motorbike, wash machine, TV and so on. It's very easy to borrow, even you only have a low income. You just need some guarantee to write on the note.

I will take one example from me. I'm building a house. I told here if you want me to give you this present to you kids and you, I want you to come with 150000. She was going to the bank and borrowed 150000 and she don't even have a income for the past 3 years. Before she was making about 10000 a month on the fathers rubber farm on a 60/40.

We was helping a friend to get a new car. The cheapest to around 384000 and again, this friend only making about 15000 baht month and again they only need someone the write for them.

It's to easy to get a loan and getting in debt, and when they has to use about 50% of there income to pay loan. Then what about credit card and so on. The only way is to go to the loan sharks. They don't ask for proof of income, and it seems for me many Thais in my area has being borrowed money from them. Easy to get, but does not seems like able to pay back.

Now the government talking about the low income group and the high personally debt. If people don't learn from the beginning of there life to handle money how should this be better.

I see a bad future about the debt many people has and like the sad story about the women setting Herself on fire cause of debt she was unable to pay back.

[JacChang]

I am sick of helping those people who always need other people's help and never blame themselves. YOU ARE POOR BECAUSE OF YOU YOU YOU!!! Not any outside factors.

[Robby nz]

I agree with Charl that the current level of household debt at 83 per cent of gross domestic product (GDP) is not worrisome so long as the GDP continues to have moderate growth (4%-5%) in 2015. Bank loan interest rates would remain fixed while money becomes more plentiful through higher employment wages, business growth, and access to capital that can service debt.

However, if GDP growth is zero or minimal (<2%) in 2015, Gen. Prayut’s House of Cards will collapse. Seeing as the predictions for 2015 are already anticipating a lower than expected growth rate, subsidizing household debt as a short-term solution in 2014 will have little positive impact on the economy in 2015. The government would be better served to concentrate on increasing exports and decreasing energy imports for 2015. Ironically, this was the same strategy of the Yingluck administration.

The great economist strikes again.

However you forgot to mention the large debt the PT Govt has left the country with, because of the failed policies, that will take some time to clear.

And that the increase in household debt, particularly among the poor farmers who had to borrow because someone failed to make provision for their payment under the pledging scheme before the house was dissolved, is largely the fault of poor financial management by the PT administration.

You also forgot that the present administration is focusing on exports particularly on rice which stalled in the previous 3 years, the news tells us they are also working to increase the export of other primary produce however a sluggish world economy does not help.

You somehow want to blame everything on the present administration who inherited a mess from an inexperienced PM an incompetent revolving chair cabinet and a minister of finance who believed to lie about the economy would give people confidence.

[JOC]

I am sick of helping those people who always need other people's help and never blame themselves. YOU ARE POOR BECAUSE OF YOU YOU YOU!!! Not any outside factors.

Always nice when people show empathy and solidarity!!

It is the attitude of people like you, that has created the mess Thailand is in at the moment!!

So all the poor people in Issan, the south and the urban poor are all to blame for their predicament themselves??

Nothing to do with the powers telling them to keep their place, the same powers keeping the standard of education to a minimum, all to keep control?? All under the patronage of the highest power.

Your me-me-me attitude is a very sad one!!

[h90]

iPhone,iWant,must have now,People are up to their eyes in debit,

so they are going to give them access to more loans !,keep the

poor.poor,seems to be the mantra,they need to educate them,

you cannot spend more than you earn.

Back in Issan,families are going into big debit over funeral expenses,

they borrow money of loan sharks,to have a big funeral,for the sake

of face,most are just paying interest,if at all, so they will never get

out of the debit spiral, that goes for weddings too.

regards Worgeordie

I see it here: I have a real lot more money than my staff (well I have money and they have debts).

We need 2 cars: one is 25 years old the other 10 years. Our staff have new cars.

My Laptop is a single core with something broken on the lid, but it works, very old. My staff have newer private laptops.

My mobile phone is a nice second hand note 2, which is modified by myself. My staff have new mobile phones.

I make my food myself in the morning and evening. My staff buy breakfast at 7/11 and dinner I don't know where.

Than I have money, they have debts......

[JacChang]

<script type='text/javascript'>window.mod_pagespeed_start = Number(new Date());</script>

JOC, on 17 Oct 2014 - 20:38, said:Quote

Always nice when people show empathy and solidarity!!

It is the attitude of people like you, that has created the mess Thailand is in at the moment!!

So all the poor people in Issan, the south and the urban poor are all to blame for their predicament themselves??

Nothing to do with the powers telling them to keep their place, the same powers keeping the standard of education to a minimum, all to keep control?? All under the patronage of the highest power.

Your me-me-me attitude is a very sad one!!

Aren't you just becoming a real life example of what I am saying? HAHA

"It is the attitude of people like you, that has created the mess Thailand is in at the moment!!"

Please arrest me, I caused the flooding, it's because of me people are poor. My attitude caused global warming. If I disappear from this world, the poor would not exist. Ha ha har?

"So all the poor people in Issan, the south and the urban poor are all to blame for their predicament themselves??"

Good point, let's blame the "not poors" surely they are the cause if the poor aren't to blame. HOW COULD WE BLAME THE POOR?! They are good innocent people, they just like to spend more than they have. Let's start a protest, boycott rich people.

"Your me-me-me attitude is a very sad one"

I'm crying, wiping my tears with 1,000 baht notes. Oh wait, I'll get an infection. If I go to the hospital, my hospital shares will give me more dividend, then then.... THE POOR WILL GET POORER. omg.

[casualbiker]

iPhone,iWant,must have now,People are up to their eyes in debit,

so they are going to give them access to more loans !,keep the

poor.poor,seems to be the mantra,they need to educate them,

you cannot spend more than you earn.

Back in Issan,families are going into big debit over funeral expenses,

they borrow money of loan sharks,to have a big funeral,for the sake

of face,most are just paying interest,if at all, so they will never get

out of the debit spiral, that goes for weddings too.

regards Worgeordie

I see it here: I have a real lot more money than my staff (well I have money and they have debts).

We need 2 cars: one is 25 years old the other 10 years. Our staff have new cars.

My Laptop is a single core with something broken on the lid, but it works, very old. My staff have newer private laptops.

My mobile phone is a nice second hand note 2, which is modified by myself. My staff have new mobile phones.

I make my food myself in the morning and evening. My staff buy breakfast at 7/11 and dinner I don't know where.

Than I have money, they have debts......

I kinda agree. BUT also see your a bit cheap :-D