BOT works to get loan sharks under its wings
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The Bank of Thailand is attempting to encourage loan sharks to take part in the country's official non-bank lending system, and two or three big players are interested in the proposal.
“We are making an effort to solve unorganised lending,” said Salinee Wangtal, the central bank’s assistant governor for the Supervision Group. “We’ve been telling unorganised lenders [commonly know as loan sharks] that if they register in the organised non-bank system, they will be able to sell their lending portfolios.”
Under the BOT’s lending regulations, registered non-bank lenders must not charge borrowers annual interest of more than 28 per cent. Currently, loan sharks charge about 50 per cent per annum or even more. The number of these lenders is unknown; many of them are individuals in the provinces.
On the banking side, microfinance is being provided by specialised financial institutions (SFIs). Interest on microfinance loans is fixed at no more than 15 per cent per annum.
These SFIs are the Bank for Agriculture and Agricultural Cooperatives, which mainly extends loans to farmers; the Government Savings Bank, which serves small borrowers in the cities; the Government Housing Bank, which provides mortgages to retail home-buyers; and the Islamic Bank of Thailand, which provides banking services for Muslims.
“They are doing their jobs well in microfinance,” Salinee said in a group interview.
Microfinance has seen high growth in some countries such as Indonesia, the Philippines and Bangladesh because of high interest rates of more than 30 per cent per annum charged by alternative lenders.
“Their rates are high because of high credit risks and high operating costs,” Salinee said.
