Subsidies for bad debts in welfare cases
THE Finance Ministry plans to subsidise about 40 per cent of the bad debts of the Government Savings Bank (GSB) and the Bank for Agriculture and Agricultural Cooperatives (BAAC) arising from the 1.2 million low-income earners who registered for government welfare.
“The FPO (Fiscal Policy Office) will ask GSB and BAAC to ease their loan extension conditions for this group of debtors so that solutions to the country’s bad debt could go ahead,” Krisda Chinavicharana, secretary-general of the FPO under the ministry, said yesterday.
“Once both banks relax their rules, we will consider subsidising their bad debt burden.”
The planned move aims to entice these two banks into helping to solve the country’s perennial informal debt problem.
GSB and BAAC have extended loans to help the registered poor with problematic informal debts.
The subsidy ratio could be at the same level or close to the previous one – about 40 per cent of total bad debts.
Usually, the government subsidises 40 per cent of the loans for this group, and the rate of bad debts for such borrowers is normally no more than 30 per cent, Krisda said.
Of about 14 million registered low-income earners, 1.2 million are trapped in informal debts amounting to about Bt60 billion. They have not yet gone through debt negotiations.
The FPO has sent these debtors’ information to both banks for contact and direct assistance.
“We sent the list of these informal debtors to both banks, which will select their customers and forward their own lists to their branches for contacting them and solving their problems,” Krisda said.
Most of those with informal debts live in the Northeast and Bangkok.
Based on the total loan amount of Bt10 billion aimed at solving the informal debt problem, GSB and BAAC jointly extended Bt4.8 billion to 100,000 informal debtors.
Call for loan shark arrests
If solving the informal debt problem is a collaborative effort of agencies including state-run banks and pico finance operators, and if security-related agencies work together to inspect and arrest loan sharks, the informal debt problem would be eliminated, Krisda said.
Pico finance operators are expected to help alleviate the informal debt problem. Already 141 operators have been granted pico finance licences in 40 provinces, extending Bt42.19 million in loans.
This year’s target is to increase the number of approved pico finance licensees to 200 operators.
