The government has pumped 40 billion baht in fresh funds for loans to low earners and farmers in rural areas through the Village and Urban Revolving Fund as part of efforts to help them ride out the decade-worst drought and stuttering economy.
The fund is the most effective way to direct cash to farmers, Finance Minister Sommai Phasee said after witnessing the signing of contracts to borrow 40 billion baht from the Government Savings Bank (GSB) and the Bank for Agriculture and Agricultural Cooperatives (BAAC).
The state-owned banks have lent 27 billion baht to the fund since the scheme was established 11 years ago.
Water scarcity due to the El Nino-driven drought has dealt another blow to low earners in rural areas and farmers suffering from the economic doldrums, high household debt and low farm prices.
The Fiscal Policy Office recently reported that the agricultural production index fell by 7.3% in May due to declines in output of paddy, rubber, palm oil and maize as a result of the drought.
The GSB and BAAC will each provide 20 billion baht for the fresh funding.
Each village fund's borrowing is capped at 5 million baht for the five-year loans with interest rates of less than 5%. Village fund members are eligible to seek loans for occupational purposes or repayments to loan sharks.
Only village funds ranked as grade A and B are eligible for loans.
At present, 59,800 village funds or around 75% of the total of 79,000 are rated as grade A and B. Transparency in fund management and accounting is the major factor to decide the grade.
PM's Office Minister Suwaphan Tanyuvardhana, who oversees the National Village and Urban Community Fund, said the scheme had opened up opportunities for people in rural areas to access funding.
The 40-billion-baht loans are expected to be drawn down in one year.
A source at the National Village and Urban Community Fund said village funds have lent 200 billion baht to members and have deposits outstanding of 50-60 billion.
Village funds have seen 5% of loans turn sour.