FRIDAY, March 29, 2024
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Govt to crack down on loan sharks, offer lending licences

Govt to crack down on loan sharks, offer lending licences

THE GOVERNMENT will exercise its powers under Article 44 of the interim charter to bring “loan shark” moneylenders into the financial system by issuing new licences to qualified operators to help low-income people avoid extremely high interest charges.

Somchai Sajjapong, permanent secretary for finance, said Prime Minister Prayut Chan-o-cha had agreed to a proposed solution in which illegal moneylenders who charge borrowers interest rates of more than 15 per cent per year will be prosecuted.
However, these moneylenders may apply for so-called “Pico finance” licences to do business legally, allowing them to charge interest rates of up to 36 per cent per year, Somchai said.
The maximum 36-per-cent yearly interest rate is equivalent to the rate currently charged by lenders who have “nano finance” licences from the Finance Ministry.
For the “Pico finance” licensees, the target groups will be low-income people who need Bt20,000 to Bt50,000 loans on an urgent basis. 
 
Exorbitant interest rates 
At present, illegal lenders charge interest rates of as much as 20 per cent per month or 240 per cent per year on such loans because many low-income people do not have access to traditional bank loans.
Somchai said applicants for the new licences would need to show their source of funds to do business legally.
In addition, the Government Savings Bank and Bank for Agriculture and Agricultural Cooperatives will open new business units to help low-income people manage their financial needs. Governors will head committees at the provincial level to help low-income people refinance their debts and explore new sources of income in accordance with the Pracha Rat, or “state of the people”, programme, in which large private companies are meant to help local communities create small enterprises.
Somchai said the Finance Ministry is preparing several measures to solve related problems and will submit a package for Cabinet approval next month. Major private companies such as Charoen Pokphand, Central and Mitr Phol groups will also be involved in the Pracha Rat programme to create and support new community-based small businesses to create new jobs and income in the provinces.
At present, there are about 1.3 million low-income people nationwide who have to borrow money from loan shark providers. The combined outstanding loans are estimated to total about Bt50 billion.
“At present, all lenders charge more than 15 per cent interest rate per year which is illegal, but we will give them a chance to apply for proper licences,” Somchai said.
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