Sharks may be registered in bid to curb interest rates
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Loan sharks may be allowed to register with the Finance Ministry in a bid to bring down the interest rates they charge.
“The United States has allowed underground lenders to register their businesses, and Thailand might apply this model to solve [problems related to] our off-system money market,” Somchai Sujjapongse, director-general of the Fiscal Policy Office, said yesterday.
The borrowers would be assisted by state-owned banks through new loans or refinancing. The new lending window would be part of the usual business of those banks, he said.
Registered loan sharks could charge more than market rates but not by much. The maximum rate would be set by law.
A bill will be proposed to the government and it will depend on the policy-makers to implement it, Somchai said. The office floated this idea before but it was shot down by the finance minister.
It seems to be a win-win solution, he said, as loan sharks could run their business legally and still receive appropriate returns while debtors would not face usurious interest rates.
The office is also drawing up a plan to help borrowers who cannot access bank loans and have to resort to loan sharks.
Several governments have tried to help them by initiating short-term measures, and they were implemented mostly by state-owned banks, such as the Government Savings Bank, Islamic Bank of Thailand, Bank for Agriculture and Agricultural Cooperative, Small and Medium Enterprise Development Bank and Krungthai Bank.
Those banks may be assigned to design new lending products to support those wanting to borrow to refinance underground loans. The maximum loan for each individual may be fixed at Bt10,000 with the interest rate much lower than those charged by loan sharks.
State-owned banks will be asked to report to the Finance Ministry about their new lending activities.
The State Enterprise Policy Office will set guidelines for banks on the implementation of the refinance loans.
After the debt restructuring is completed, borrowers can turn to state-run banks to refinance their obligations.
Rising household debt is not a concern, Somchai said, as it has not yet reached a critical level. The Bank of Thailand has asked banks and non-banks to refrain from campaigning heavily for spending on credit, but most debts are mortgages that generate wealth for the home-owners, he added.
The National Economic and Social Development Board has recently said that household debt in the third quarter of this year soared but repayment ability dropped. Outstanding consumer loans surged 20.4 per cent year on year to Bt2.75 trillion while defaults on personal loans jumped by 37.8 per cent and on credit cards by 11.1 per cent.
Government policies such as village funds and first-car and first-home purchase schemes have been blamed for helping to drive up household debt.
