Vorapak urges shift to risk-based pricing to tackle Thailand’s informal debt

Vorapak Tanyawong, former CEO of Krungthai Bank and a frontrunner for the post of deputy finance minister, posted on his personal Facebook page calling for an end to misapplied interest-rate caps on retail loans. He argued it is time to implement risk-based pricing (RBP) as a sustainable solution for informal debt.

“Risk-Based Pricing is the future of Thai lending: higher-risk borrowers can access credit, lower-risk borrowers pay less,” he said.

This concept is not merely a policy slogan. It represents a fundamental shift in thinking about financial fairness, which Thailand is beginning to pursue seriously under the Reinvent Thailand initiative, a new economic strategy for the country’s future.

Signals from the Bank of Thailand

On September 12, 2025, the Bank of Thailand, Fiscal Policy Office, the Thai Bankers’ Association, and three retail-lending providers held their first joint meeting to kick off the design of a risk-based pricing mechanism in Thailand.

The meeting marked a turning point for the Thai lending system. RBP is not just about lowering interest rates for responsible borrowers. It also opens the door for previously excluded high-risk borrowers to re-enter the formal financial system fairly and sustainably.

Previously, debates over interest-rate caps were seen as consumer protection. In practice, overly low caps, such as 25% per year, acted as a double-edged sword:

• Lenders were unable to extend credit to high-risk borrowers.
• Many borrowers had no choice but to rely on informal lenders charging 60–200% annually.
• The financial system could not build credit histories for a large segment of the population.

Risk-Based Pricing: a win-win approach

The RBP framework promoted by the Bank of Thailand and FPO will create a system where interest rates reflect risk, with features such as:

• Good repayment history → lower interest rates.
• Higher-risk borrowers → access to credit at rates aligned with their risk, without resorting to informal lenders.
• Everyone can start building a credit history from scratch, creating a positive financial cycle.

The approach aligns with financial inclusion and responsible lending principles, and if well-designed, can eradicate informal debt at its roots.

Implementing RBP requires serious capabilities from lenders:

1. Accurate credit models using AI/ML and alternative data.
2. Borrower protections, including clear disclosure statements.
3. Robust mechanisms for supporting non-performing borrowers post-lending.
4. Reduced unit costs via digital infrastructure, such as mobile underwriting.

This means not every lender can adopt RBP—it requires technological readiness, ethical standards, and human capital.

Pilot sandbox to test effectiveness

The Bank of Thailand and other government bodies propose a pilot sandbox to assess:

• Whether lenders can practically implement RBP.
• Whether the system can reduce informal debt.
• Its effect on the average interest rates in the formal system.

Only once proven effective will RBP be scaled nationwide.