Thai govt mulls 'nano-financing' to ease debt problems with loan sharks

[webfact]

Government mulls 'nano-financing' to ease debt problems with loan sharks
The Nation

BANGKOK: -- The Finance Ministry will propose a "nano-finance" concept to help non-bank lenders extend money to grass-roots people, or those who don't have access to capital. "Nano" means "extremely small".

The plan is being put forward as a ministry guideline on resolving out-of-system debt problems, usually caused by loan sharks.

Under the concept, non-bank lenders would be allowed to offer loans to a maximum of Bt100,000-Bt120,000. These loans would be subject to higher interest rates than those from financial institutions, but lower than the rates generally charged by loan sharks, said Finance Minister Sommai Phasee.

Initially, the interest rates for nano-finance are expected to range from 30-36 per cent per annum. Those interested in operating a nano-finance scheme would be required to register with the ministry.

"The ministry will propose that Deputy Prime Minister Pridiyathorn Devakula consider in the next 10 days whether to seek approval from the Cabinet," Sommai said.

He said that normally, the ministry would ask financial institutions to extend loans of not more than Bt200,000 each to people indebted to loan sharks. This interest rate was capped at 28 per cent per annum. However, many bankers expressed concern that this was not easy to achieve and would not resolve the problem.

"If we do not finalise what to do, the out-of-system debt problem will spread. So we think nano-finance is the last choice," Sommai said.

Each eligible nano-finance operator would be required to have paid-up capital of not less than Bt10 million and would not be allowed to receive deposits from the public as banks do. The lender could mobilise funds by means of promissory notes from its shareholders in accordance with Securities and Exchange Commission regulations. One operator would be permitted per province.

Approved nano-finance operators would be offered tax incentives, such as a 50-per-cent deduction on their annual corporate income tax.

"I believe nano-finance would not increase household debts, but it would help reduce the proportion of out-of-system borrowing counted as household debt," the minister said.

According to a recent survey of household debt, about 50 per cent is outside the banking system.

Sommai claimed the Thai economy was being hit by stagflation, meaning that consumers have less money to spend. However, this stagflation was not risky to the economy because the fiscal status was sufficiently strong while the government has measures to stimulate the economy. When the government evaluates economic stimulus measures in the first quarter of the current fiscal budget, it is expected to see resolution of stagflation.

Source: http://www.nationmultimedia.com/politics/Government-mulls-nano-financing-to-ease-debt-probl-30245916.html


-- The Nation 2014-10-21

[needforspeed]

30-36 per cent interest, that will realy help the low incomes.

What a joke

[JimShortz]

With those interest rates it is just legalising loan sharking... They should look at how low-cost community banking schemes work elsewhere. I was involved with one in the UK where both lenders and borrowers were from the local community. It creates local responsibility and care.

[noitom]

The Thai poor will be paying this 30-36% juice for the rest of their lives and their childrens'

[bkkgooner]

30% interest rate?

The most I have ever paid was 20% to a loan shark and I thought that was daylight robbery

[Jessi]

More happiness for the Thai people .............30 to 36% P.A. interest. <deleted>.

[ezzra]

More government handouts..when would they learn that handouts, coupons and freebees NEVER

work, all the create is the sense of give me more, we want more, let the people stand on their own

two feet, they will wobble in the begging but at the end they will learn that free money, small loans

and assistant earning only solve the problem for the moment... give a man fish a day......

[RKASA]

"Those interested in operating a nano-finance scheme would be required to register with the ministry." So once your signed up and have a share method that flows up to the right people your no longer a shark - your a banker?

[chainarong]

It is not the place of government to offer loans of this nature, just because people have got in far over their heads to loan sharks , what the governments job is to introduce laws , outlawing these types of loans, loan companies or money lenders should not be allowed to offer services without proper accreditation within the financial regulations system , nobody should be working outside of these rules, if people are breaking the law , the RTP should be investigating on behalf of the people and all loans null and void. That is the proper procedure , nothing to mull over at all.

[wwest5829]

More government handouts..when would they learn that handouts, coupons and freebees NEVER

work, all the create is the sense of give me more, we want more, let the people stand on their own

two feet, they will wobble in the begging but at the end they will learn that free money, small loans

and assistant earning only solve the problem for the moment... give a man fish a day......

So, don't know why I ask but is there an assumption here that there is plenty for all if they just work for it? You do not favor recognizing that society should help the bottom of the economic distribution end of the equation? In all relatively " free market" scenarios we let the bottom starve? My reading on history is that it is in our interest to take care of the bottom for they will not suffer quietly and meekly. I also note that there must be unemployment to allow for expansion and contraction of the labor needs....unless you can have full employment and allow for immigration to fill the additional labor needs. Think you are being a tad strict in your wording...or do you embrace a more Puritan view of economic interactions?

[recycled]

Loan sharks are illegal, so get rid of them and the loans disappear. Easy, not in this country whereby the police and military are the Mafia running the show with the full support of the PM.

[ChrisY1]

Quite incredible that these so called finance ministry people actually think like this.........certainly indicates the very serious issues in the Thai education system.........!

All university graduates no doubt....many at masters degree level.......combined, there would be degrees than a thermometer, and they keep turning out tripe like this......!

[rakman]

Years ago in the Philippines, a department store offered time payments for consumer goods. The interest rate was 36%. The expectation was the store might get the first few payments until the item was "borrowed" by a friend.

It is unfortunate the government would be a part of such a family crushing scheme. Can't say if the government would also break some knee caps if the loan is not repaid. I would have hoped the government would make the interest affordable, it would be less of a loss than the rice pledging scheme.

[trainman34014]

So; this is 'returning happiness to the people ' ? What next ..double the price of rice and oil in the shops even though rice is rotting in warehouses and oil is overflowing from the storage tanks ?

[northernboy]

Is it now clear, to allow the banks to set up higher interest rates through subsidiary firms for loan for higher interest rates than they or any private lender is allowed to charge.

Just like in the States the banks get loans cheap and lend to their subsidiaries to offer poorer clients at way high rates but the parent company is at little risk of a bad name and gets great returns.

Wish I had 10 million to start, but only the VIP,s will get the one per province pay off.. Just watch and see is not to help the poor but to reap the profits for the rich. friends of the government and power brokers.

Love to seeing the sales pitch they offer these gifts or kick backs to the few, as policies that are good for the people.

PS anyone that thinks right rate loan givers is as stupid as the people that take them are.

​PPS the government just made loan sharks legal for one group per province. Anyone who think otherwise is clearly with their head in the sky.

[northernboy]

30% interest rate?

The most I have ever paid was 20% to a loan shark and I thought that was daylight robbery

Was it your credit card company?

18-24% is not unheard of.

[Robert24]

30-36% is actually quite a big improvement to today. Now you pay about 40-50% for non-bank lending with security, ie you transfer land to the creditor as security before you get the loan. Loans without security have much higher interest.

[Shamrock 1234]

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There is an organisation called Kiva which lends small sums of money to small businesses and small project co-ordinators. The money is collected from all over the world and then the individuals, when approved receive the money repayable over a number of years at negligible interest rates. i have participated in this scheme for about 5 years now, and have never not been re-paid. Once the loans are complete I give the money back to the system so somebody else can benefit. That is what I understand nano finance to be . This scheme is very much for profit.

With those interest rates it is just legalising loan sharking... They should look at how low-cost community banking schemes work elsewhere. I was involved with one in the UK where both lenders and borrowers were from the local community. It creates local responsibility and care.

[northernjohn]

30-36 per cent interest, that will realy help the low incomes.

What a joke

well you obviously have no idea of what the loan sharks charge.

I saw this and was wondering if it might be like the Thaksin plan where the people got money at a much lower interest rate to pay of the looan sharks. Most of them spent it on motor bikes and electronics and wound up owing more money.

This scheme sounds good if what they do with the money is monitored. If not it is a bad idea.

[northernjohn]

30% interest rate?

The most I have ever paid was 20% to a loan shark and I thought that was daylight robbery

it was not per annum. More than likely monthly or weekly.

[Pib]

Approved nano-finance operators would be offered tax incentives, such as a 50-per-cent deduction on their annual corporate income tax.

I'm sure all current loan sharks will want to get-legal and take advantage of the 50% tax deduction on the annual tax they are paying on their current loan business.

[MobileContent]

"Nano" means "extremely small".

It's called Micro Finance.

[worgeordie]

Open up some Wonga and their ilk money lenders,their rates

are about 1200% or more,why does the Govt. always want to

help people in debit,while people who manage their money

and even try to save are given the sh3T end of the stick,with

interest rates the way they are.

Lots of people get into debit by buying things they really don't

need but MUST have, the really poor people thats an other

story,the way prices of food have been rising,my heart goes out

to them,

regards Worgeordie

[jaltsc]

"Under the concept, non-bank lenders would be allowed to offer loans to a maximum of Bt100,000-Bt120,000. These loans would be subject to higher interest rates than those from financial institutions, but lower than the rates generally charged by loan sharks, said Finance Minister Sommai Phasee."

Nowhere did I see the term "collateral". What happens when the borrower can't pay back the loan? How are they going to recoup their unpaid loans? Well, since they are institutionalizing loan shark-like rates, they can also institutionalize loan shark methods for collection.

It appears that this is just going to be another Less Than Thought Out plan.

Edited October 21, 2014 by jaltsc

[SOTIRIOS]

....wouldn't that in fact be 'subsidizing' loan sharks.....???

[marcusd]

Where do I line up to fleece - OOPS I mean HELP the hoards of poor people waiting to buy new Iphones and the like and dont forget new TV and clothes and OH that must have ...

Oh I must queue behind the hoards of people at the top in already corrupt positions of power who will fleece their own people moreso

[Pib]

Reading a news article in the 21 Oct 14 Bangkok Post titled, Thailand Is Facing Stagflation, it said the banks complained the Finance Ministry Nano-Finance plan at 28% interest was not economically viable for the banks.

Now, of course 28% interest is economically viable "if most everyone repaid their loans and/or collateral was backing the loans," but I expect the banks felt too many of the loans made under the Nano-Finance rules would be a money loser for them....that is, too many Non-Performing Loans (people not paying back the loans).