Thai government to the rescue: Deputy PM Anutin announces low-interest loans up to ฿50,000 for good credit borrowers outside the formal system. It comes amid rising concern for the safety of lenders as a top committee aims to curb informal debt, offering relief and legal protection to all parties.
Amid increasing anxiety about the extent of informal debt in the kingdom as creditor numbers seeking help, rise inexorably, Minister of the Interior and Deputy Prime Minister Anutin Charnvirakul this week announced a new low-interest loan facility with amounts up to ฿50,000 made available to borrowers with good credit at a competitive interest rate of 0.75% per month. It comes with rising concern for the protection of lenders. The government, following reports of violence and intimidation, committed itself to afford protection to both sides of the country’s chronic household debt problem.
Significantly, in a move to address the longstanding issue of informal debt, Deputy Prime Minister and Minister of Interior, Anutin Charnvirakul, unveiled a comprehensive plan aimed at aiding borrowers outside the formal credit system.
The announcement was made on December 18, 2023. At length, it comes weeks into a campaign where over 105,000 hard-pressed debtors have registered with his ministry for help. Certainly, the latest news underscores the government’s commitment to alleviating the financial burden on overstretched Thai households.
Loans of up to ฿50,000 for borrowers with a good credit history to be provided by state banks as one part of the solution to the household debt crisis
Minister Anutin disclosed that the government will extend loans of up to ฿50,000 to individuals with good credit standing. This will be provided outside the conventional credit system. And the good news doesn’t end there.
The loans will come with an ultra low-interest rate of only 0.75% per month. It is a decisive move likely to bring relief to many struggling with informal debt.
In a detailed interview, the Deputy Prime Minister explained the government’s strategy and the outcomes achieved thus far. He revealed: ‘The total debt registration for the past three weeks stands at 99,484, with a cumulative debt of ฿5,926 million.’
This figure rose by December 21 to over 105,000 borrowed with over ฿6.5 billion in debt.
State banks are eager to help resolve the issue. Household debt committee chaired by Anutin pursuing a multi-pronged solution to the intractable problem
Encouragingly, Anutin announced that the Government Savings Bank and the Bank for Agriculture and Agricultural Cooperatives (BAAC) are gearing up to help. The banks will provide low-interest credit lines. They will also work harder to ensure accessibility to those in need. The 0.75% per month loan offers significantly more affordable credit compared to problematic loan providers outside the formal system.
This initiative comes as part of a broader effort to address the informal debt crisis. The government recently established an informal debt management committee.
Mr Anutin, who chairs it, emphasised the need for a multi-pronged approach. He disclosed: ‘The meeting resolved to appoint a subcommittee to oversee the resolution of informal debt problems, with the Permanent Secretary of the Ministry of Interior as chairman.’
At this point, the committee has identified three key areas to tackle the informal debt problem: debt reconciliation, law enforcement and financial assistance.
Concern for lenders with reports of violence. Government assures that their rights and contract entitlements will also be protected in the new campaign
Presently, the minister assured citizens that protective measures are in place stating: ‘Please be assured that both sides will receive protection from the state. There will be no threats or physical harm to property.’
In effect, the current campaign has raised disturbing questions about the rights of debtors. Some creditors, buoyed by official concern for their plight have begun to reject their financial obligations. In addition to fears of moral hazard, this is also a threat to law and order.
In the meantime, there are credible reports of an aggressive attitude from creditors and instances of violence.
The government is anxious to assure lenders that authorities will also safeguard their legal and contractual rights.
Law enforcement, led by the Royal Thai Police, will actively engage with administrative officials to safeguard the rights of debtors.
Anutin vows to act against illegal practices. Loans with interest rates in excess of 15% per annum are illegal and could be simply voided under the law
On the other hand, the government will curb any illegal practices. Mr Anutin warned that charging interest rates exceeding 15% per year will be considered void and illegal.
The Ministry of Finance will play a pivotal role in providing financial assistance. The Government Savings Bank and Bank for Agriculture and Agricultural Cooperatives (BAAC) will offer credit lines with favourable terms.
The campaign addresses the urgent financial needs of those facing informal debt. The interest rate will range from 0.75% to 1.5% per month, depending on individual conditions.
Explicitly, as part of the efforts to resolve the informal debt crisis, the government is also committed to mediating between debtors and creditors. Anutin revealed: ‘For information on informal debt mediation throughout the country, it was found that 1,294 debtors had entered the mediation process, 224 were successful in reconciliation.’
This success is attributed to the collaborative approach involving various agencies and departments.
Incident in Nonthaburi where a creditor was attacked and died while he attempted to enforce collection of loan repayment. Numbers registered still rise
However, it is not all plain sailing. An incident on December 15, 2023, highlighted the potential danger of the debt alleviation campaign and the need for vigilance,
Previously, a debtor’s husband, under distress due to debt collection attempts, reportedly accelerated his pickup truck into a creditor. It resulted in the loan shark’s death.
The incident took place in Nonthaburi Province.
In any event, on Friday, Permanent Secretary of the Interior, Suthipong Chulcharoen, provided an update on the registration process. As of December 21, 2023, a total of 105,482 people registered, with a debt amount totalling ฿6,576 million.
Extent of the problem as yet unknown
The government continues to emphasise parallel efforts, urging citizens to register and coordinate with local agencies for effective debt mediation.
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There are as yet no firm figures on the extent of the problem. Some estimate that there is ฿ 1 trillion in outstanding informal loans in the country. This is credible given that there is ฿3.48 trillion in loans advanced by financial organisations outside the banking system.
Thailand’s total household debt level is over ฿16 trillion or 90% of GDP. As well as that, many believe that with a stalling economy, the situation may even be far worse.
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