First-time workers lift loans levels

Indebted employees want to borrow more

First-time workers are running up debt in a fresh sign of swelling household debt after some improvement in the situation in recent months.

A store clerk waits for customers at MBK shopping mall in Bangkok on Friday. Consumer spending has shrunk sharply in recent months due to high levels of household debt and, more recently, the latest round of demonstrations. THANARAK KHOONTON

The household debt-to-income ratio of first-jobbers earning 10,000 to 30,000 baht a month has surged to 34% from 24% in 2009, National Credit Bureau (NCB) chief executive Surapol Opasatien told the Bangkok Post in an exclusive interview.

That figure is now on a par with the average debt-servicing ratio of borrowers from commercial lenders.

Commercial banks typically cap the debt-servicing ratio of customers at 40%.

"Higher debts of first-jobbers can be attributed to both their lifestyle, which focuses on spending rather than saving, and better access to bank loans," said Mr Surapol.

National Economic and Social Development Board data show there are 3.7 billion households of first-jobbers compared with 1.6 billion households of low-income earners. Some 9.5 million householders shoulder debt, 3.7 million earn 10,000 to 30,000 baht a month, 2.9 million earn 30,001 to 50,000 baht a month, 1.6 million earn up to 10,000 baht per month, 1 million earn 50,001 to 100,000 baht a month, and the rest earn more than 100,000 baht a month.

First-jobbers tend to spend instead of save, says Mr Surapol. PORNPROM SATRABHAYA

Despite a slowdown in debt accumulation by low-income earners after their debt-servicing ratio ballooned to the limit, the rising debts of first-jobbers will increase that of the country's households.

Following the government's consumption stimulus measures amid weak demand from the West, especially the first-time car buyer scheme, household debt at the end of the first quarter reached almost 9 trillion baht or 77.5% of gross domestic product compared with 1.36 trillion or 28.8% during the 1997 financial crisis.

Standard & Poor's in October said its analysis of 14 Asian economies found the credit profiles of banks in Malaysia and Thailand to be the most vulnerable to a deterioration in the health of their respective household segments.

Banks in both countries have significant levels of loans to households.

However, Bank of Thailand governor Prasarn Trairatvorakul recently said the growth in household debt slowed after banks tightened loan approvals for fear of rising bad loans. The household debt-to-income ratio of low-income earners (10,000 baht or less per month) is 61%, a sharp rise from 45% in 2009.

This suggests their debt-servicing ability is deteriorating and that it is fairly difficult for them to tap new loans.

Separately, 78 financial institutions that are NCB members made 27.8 million requests for credit checks of loan applicants in the first 11 months of this year, up significantly from 20.9 million in the same period last year.

Of that total, 14.8 million were enquiries for credit reviews of existing customers, meaning those already indebted were seeking fresh loans, while the other 13 million were for new customers.

The number of enquiries for existing customers is expected to reach 16 million by year-end, while those for new customers should reach 14 million.

Rising household debt has encouraged financial institutions to focus more on risk management including credit checks.

The prudent approach has also been adopted by foreign banks, as seen by the fact that they check customers' credit records monthly instead of quarterly.

Thai commercial banks now make quarterly credit checks instead of twice a year, while state-owned banks make checks every six months instead of once a year.

Leasing companies are also making more checks of existing clients.

Individuals checking their credit records with the NCB in the first 11 months numbered 417,758, up from 391,786 in the same period last year, and the number is expected to reach 460,000 by year-end.

About the author

Writer: Somruedi Banchongduang
Position: Business Reporter