More help to fight loan sharks

More help to fight loan sharks

The government plans to make another move to curb loan sharks by offering borrowers 50 billion baht in new soft loans to refinance non-formal debts.

The soft loans will be provided through the Bank for Agriculture and Agricultural Cooperatives (BAAC) and Government Savings Bank (GSB) with 1% interest per month, said BAAC president Luck Wajananawat.

"The BAAC and GSB were assigned by the government to use this tool to tackle the loan shark problem," Mr Luck said. "Each bank received a budget of 25 billion baht to lend to low-income borrowers."

Luck: Cheaper rates than nanofinance

The 12% annual interest rate is lower than nanofinance rates, which by law can reach 36%, he said.

Previously the BAAC allowed non-formal loan borrowers to register with it for refinancing assistance. Some 36,000 borrowers out of 100,000 that registered became the bank's clients with the BAAC providing 3 billion baht for refinancing.

"We will be setting up a permanent office to solve loan shark issues at the bank in the near future to serve the Finance Ministry mandate," Mr Luck said.

State agency loans have also become a government concern, said Sunee Eksomtramate, executive director of the Policy and Planning Bureau of the Public Debt Management Office.

Mrs Sunee said the amended Public Debt Act allows the Finance Ministry to closely manage the borrowing of state agencies even though the debt is not defined as public debt by law. The cabinet approved the amendment on Tuesday.

The amendment allows the ministry to closely manage government agencies' debt that can put the country at great fiscal risk such as the 3-trillion-baht debt of the Bank of Thailand, the 34-billion-baht debt of local administration organisations and the 12 billion combined debt of state universities and public organisations.

"We want to better manage state agencies' borrowing plans. For instance, a borrowing ceiling must be set for local administrations that have high potential to default as they are allowed to borrow without limits now," she said.

The ministry is also a guarantor for this debt under the amendment.

"This debt puts Thailand at great fiscal risk if we don't pay attention to their finances," Mrs Sunee said.

As of April, Thailand's public debt was 6.05 trillion baht or 44.9% of GDP.

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