The Fiscal Policy Office (FPO) has proposed separating the accounts of almost 20,000 Villages Funds ranked below grade B.
The move is aimed at unlocking and allowing them to receive fresh capital of 1 million baht each to stimulate the rural economy.
It is difficult for troubled Village Funds to address problems incurred under the previous management, so separating the new accounts from the existing ones to allow them to tap the new funding will help them, director-general Krisada Chinavicharana said.
He said to prevent them from repeating past mistakes, however, the FPO must establish regulations.
Some 19,000 villages have not received the third round of the 1-million-baht new capital after the government recently paid an additional 6,000 villages.
The former Pheu Thai government approved the third round of the 1-million-baht injection to each Village Fund, and 25,000 villages nationwide at that time did not receive the new capital as they were ranked below grade B.
The present government last month separately extended 40 billion baht in loans to low-income earners and farmers in rural areas through Village Funds as a way to direct money to them.
Like the fresh fund injection, only Village Funds ranked grade A and B are eligible for the loans.
At present, 59,800 Village Funds, or 75.5% of the total 79,255 are graded A and B.
Transparency in fund management and accounting is the major factor defining the grade.
The funds have a combined 13 million members and cash flow of 200 billion baht.
High household debt, the worst drought in a decade, the spluttering economy and low farm product prices have hit low-income earners in rural areas and farmers.
Apart from fresh loans to Village Funds, the FPO is mulling several compensation measures to help rural residents.
Natee Khlibtong, secretary-general of the National Village and Urban Community Fund Office, said the government would expedite lending to the remaining Village Funds, but it must ensure the new management of such funds would not repeat past problems.
The Village Fund scheme was initiated by the Thaksin Shinawatra government to serve as a microcredit lender to rural dwellers, similar to Bangladesh's Grameen Bank, widening their access to financial sources to help them avoid resorting to loan sharks.
About 300 million baht in loans previously extended by Village Funds, representing less than 5% of loans, are under civil and criminal court proceedings. Late payment amounts to 2 billion baht, with 30% of Village Funds experiencing this problem.