Loan sharks now preying on salaried workers, Justice seminar told

Academics called on the government to issue bonds worth Bt50 billion and allow its commercial banks – Krungthai Bank and the Government Savings Bank – to grant loans to individual borrowers, especially workers. The labour bank should be set up within three years to solve the loan-shark problem in a sustainable way.
Narong Petchprasert, a political economist at Chulalongkorn University, said the problem had expanded from rural areas and the agricultural sector to urban societies and industry.
Of the total of more than 17 million salaried workers, about 14 million are in the private sector and 8 million to 9 million have average incomes of Bt8,000-Bt9,000 per month, which is not enough to support their families, especially during periods of no overtime. Many have had to turn to other sources of funds, such as supervisors or co-workers.
“It is now a serious concern for the country, as loan sharks are threatening the labour force. Thailand’s economy relies on industry, which contributes 88-90 per cent of GDP. The agricultural sector represents only 10-12 per cent of GDP,” he said.
“The government has focused on solving the problem in rural provinces, especially through their official loans provided via funds, such as Village Fund, the funds granted by the Bank for Agriculture and Agricultural Cooperatives and the SML Fund.
“There are more than 15 funds set up to provide loans to people in the agricultural sector, which has only 8 million members. Local farmers have less of a problem with informal loans, but the problem has increased sharply in the labour market, especially in industry.
“The problem will affect manufacturing in Thailand in the long term,” he said.
Thawatchai Yongkittikul, secretary-general of the Thai Bankers Association, said Thailand had been facing a higher level of loan-shark problems than other countries with lower income per capita such as China and India.
“The problem of non-organised loans in Thailand is quite severe and a concern due to the very high interest rate, which is above those regulated by law. Some people dealing with loan sharks have been charged up to 200 per cent per month in interest.
“The government’s strategy set to solve the non-organised-lending problem via the official lending system provided by its commercial banks is not direct to the point, as all commercial banks have their own criteria for qualifying customers in providing loans,” he said. “Those lower-income people who have failed to meet the standards set by commercial banks will not be able to enter the system.
“As a result, helping people via the social-welfare system should be the right solution.”