News Column

Ministry baits loan sharks with nanofinance licences

August 25, 2014

By Wichit Chantanusornsiri, Bangkok Post, Thailand

Aug. 25--The Finance Ministry will require nanofinance operators to lend to customers who live in provinces where they are awarded the operating licences to make them easier to supervise.

Those seeking province-based nanofinance operating licences are required to have at least 10 million baht in registered capital and the lending amount is capped at 100,000 baht for each borrower regardless of whether the loan has collateral, said a source at the Finance Ministry.

The annual rate charged by nanofinance lenders has been capped at 36%, well above the maximum annual rate charge of 28% set by the Bank of Thailand for personal loans. The higher rate is to attract loan sharks to seek licences as nanofinance carries high risks.

The Finance Ministry will this week seek the junta's approval of the ministerial regulation under Revolutionary Council No. 58 for nanofinance operations, the source said.

The ministry has long pushed the microfinance business in an effort to turn loan sharks into legal lenders and supervise them, while low-income earners can borrow conveniently from official sources. The plan almost became a reality when the Finance Ministry outlined the licence application early this year, but it was delayed by the recent political tensions.

The source said those who receive a nanofinance licence cannot open outlets outside province where they are allowed to operate, but they can apply for a new licence to run businesses in other provinces.

According to the Bank of Thailand's 2013 financial access survey of more than 20 million households, 8.7% used commercial banks, 13.7% used specialised financial institutions, 8.8% used other financial sources including cooperatives and village funds, 2.9% resorted to the underground loan market, 6.6% never accessed any financial sources as they were denied loans and the remainder had no need to seek financial sources.

The National and Economic and Social Development Board found that each household on average owed 136 baht to loan sharks in 2013.


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Source: Bangkok Post (Thailand)

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