BAAC reports bad-debt rate of 1.9% from farmer credit card scheme

 The bank expects the number of credit cards will increase from 4.1 million to 4.5 million by year-end. Total expenditure via the farmers’ credit cards is expected to rise to Bt20 billion, or average spending of Bt200 million per day, up from Bt120 million per day at present. 

Deputy Finance Minister Tanusak Lek-uthai said the BAAC had issued 4.1 million credit cards to all types of farmers at a total approved credit line of Bt63 billion. The farmers have used the cards to pay for various production inputs worth a total of Bt17 billion. 

Currently 8,600 stores are participating in this project. Bad debts have declined from 10 per cent to just 1.9 per cent, and they are mostly due to errors in delivering payment slips to farmers.

The BAAC requires that farmers pay their outstanding credit-card debts in full within the time frame of their farming operation, typically one year. A farmer who fails to meet the payment deadline three times is classified in the bad-debtor category immediately. However, the BAAC will not impose interest for the first month. 

Farmers who buy production inputs from the project’s participating suppliers can get another four-month interest-free period. The supplier will bear the interest burden on behalf of the farmers. Thus such farmers could get up to five months interest-free. 

To promote good financial management, the BAAC has organised activities to encourage prompt payment of credit-card debts, such as lucky draws with prizes totalling more than Bt10 million. Moreover, if the farmer allows deduction of his or her credit-card debt from the money received from rice pledging, the BAAC will cut the applicable interest by 1.5 percentage points to only 5.5 per cent. 

Farmers participating in this programme can now buy more things besides production inputs. These include animal feed, agricultural tools and equipment, and daily household consumer items such as rice. 

The farmers also get life and accident insurance coverage to a maximum of Bt100,000, including annual health check-ups from participating state hospitals. 

In addition, the farmers will, by this year-end, be able to withdraw a maximum of Bt50,000 in cash from the BAAC’s automated teller machines on a 24-hour basis when they need money for emergencies. This should help curb the need for farmers to turn to illegal lenders charging excessively high interest in such situations.

The maximum credit line of each card is Bt100,000, with average outstanding debts of Bt25,000 per cardholder, Tanusak said.