Prime Minister Suretta Tabisin declared that addressing informal debt and the problems it creates is a national priority, likening the situation to modern-day slavery.
Many people repeatedly take out formal or informal debt, with interest rates on the latter often exceeding the legal limit of 15%.
The government estimates it has 50 billion baht worth of unofficial debt, but Suletta pointed out that this is a conservative estimate.
At a press conference on national challenges and efforts to tackle informal debt last month, he said: “The government will work with civil authorities and the police to act as an intermediary to ensure fair treatment of both creditors and debtors. ” he said.
“If the government recovers the economy, people can escape the cycle of perpetual debt.”
The government estimates that it has unofficial debt worth 50 billion baht.
debt-creating acts
Apart from the uneven economic recovery leading to low income levels and debt problems, Thais have certain behaviors that lead them into debt in both formal and informal systems.
National Economic and Social Development Council (NESDC) Secretary-General Dhanucha Pichayanan said the borrowers who need special attention are young people who prefer the “buy now, pay later” (BNPL) system and the need for both online and offline marketing. said that it is getting worse.
As of 2022, an estimated 360 million people worldwide are using BNPL services.
By 2027, BNPL users are expected to grow by 157% to 900 million.
In 2021, the BNPL market was valued at USD 120 billion.
Buy now, solve problems later
According to the Thailand Buy Now Pay Later Market Report 2022, the BNPL market is valued at 55-65 billion baht.
Although 96% of Thais who use BNPL services do not default on their debt payments, the report notes that this is likely to lead to household debt problems in the future.
According to the report, more than half of Gen Y and Millennials with a monthly income of less than 15,000 baht are likely to use BNPL. In Thailand, jewelry and clothing are the items most likely to be purchased using his BNPL.
According to the Bank of Thailand, Thailand has the highest household debt-to-GDP ratio in Asia after South Korea and Hong Kong, and ranks 12th in the world.
According to NESDC, household debt in the second quarter of 2023 reached 16.1 trillion baht, an increase of 3.6% year-on-year, accounting for 90.7% of the country’s GDP.
Sompov says fiscal measures play an important role in reducing poverty.
look north
Panyapiwat Institute of Management Director Sompob Manalansang said solving problems related to informal debt needs to start from the upstream by improving people’s economic status and helping them escape poverty. .
He said China’s achievements in poverty alleviation are unprecedented, and set an example for the rest of the world, particularly under the leadership of President Xi Jinping, where high growth has lifted 800 million people out of poverty. said.
According to Sompob, as of a few years ago, there was not a single person in China living below the poverty line.
He said the Chinese government’s approach to poverty reduction is based on two pillars, the first being broad economic transformation through new opportunities to improve average incomes. These efforts include a focus on his four key areas: industrial development, increasing agricultural productivity, human capital, and sustained public investment in infrastructure.
The second pillar was the recognition that targeted support is needed to alleviate persistent poverty. Assistance was initially provided to geographically disadvantaged and opportunity-poor areas and then to individual households.
The goal was to achieve common prosperity through high-quality development, Sompov said.
He said that a fair distribution of income can only occur if a country’s income increases, which means GDP needs to expand.
Over the past 10 to 20 years, Thailand’s GDP has expanded to half that of Southeast Asian countries, excluding Singapore.
Mr Sompob said Thailand’s economy has shown an uneven recovery, which is common in developing countries.
“After the 1997 Asian financial crisis, Thailand’s GDP growth rate was slower than other ASEAN countries,” he said.
Income redistribution is a particularly important policy developed by developed countries such as Japan and South Korea to address inequality, using government mechanisms such as antitrust laws and tax reform measures to reduce poverty. , which will improve income distribution, Sompov said.
He said fiscal measures such as policies to increase government revenues and targeted state spending to expand coverage of vulnerable groups are also important for poverty reduction.
Mr. Sompob said that one of the common elements of successive Chinese leaders, including the current one, is experience in rural development.
access to finance
Fiscal Policy Director-General Porchai Tirabella said at the Ministry of Finance that nano-finance and pico-finance would expand formal sources of finance to low-income earners and undocumented workers, help them avoid usury and encourage black-lender lenders. This is part of the company’s efforts. Enter the formal financing system.
Nanofinance businesses with a minimum registered capital of 50 million baht can lend nationwide, but only for business purposes, with a loan limit of 100,000 baht per borrower, and a cap on interest, compensation, services and other fees. 33% per year. .
According to the central bank, as of September 30, 2023, 68 nanofinance companies had financed 2.05 million accounts, with a total loan balance of 38.8 billion baht and non-performing loans (non-performing loans) of 2.58 billion baht.
With a minimum registered capital of 5 million baht, a picofinance operator can make loans for general purposes, but only in the province in which it has registered its business.
Loan amount is limited to 50,000 baht per borrower, and interest, compensation, service and other charges are capped at 36% per annum.
So-called picoplus operators are allowed to offer large loans to borrowers, with a maximum loan limit of 100,000 baht per borrower, but are required to have a registered capital of at least 10 million baht. .
As of October 31 this year, a total of 1,132 picofinance applicants in 75 provinces (excluding Ang Thong and Sing Buri provinces) had received permission and started providing services.
From December 2016 to September 2023, picofinance companies loaned a total of 36.4 billion baht to 3.79 million accounts, with a total loan balance of 7.09 billion baht and non-performing loans of 1.6 billion baht.