The National Credit Bureau (NCB) has voiced concerns about the asset quality of loans extended by savings cooperatives, particularly for lengthy loans, and about the high debt-service ratio (DSR) of borrowers.
Chief executive Surapol Opasatien said the savings cooperatives never set a maximum age for borrowers and they offer very long-term loans -- practices that could deteriorate asset quality.
"For instance, some saving cooperatives offer up to 150-month instalment loans or 12½ years to borrowers aged 50-55," he said. "They allow the borrower's DSR to be as high as 70-80%. Such lending conditions could lead to asset quality deterioration, especially after borrowers retire."
Savings cooperatives' underpricing of risk is a key area of concern by the Bank of Thailand. The cooperatives offer high returns to attract depositors and often lend to risky groups in exchange for high rate charges.
Mr Surapol said demand for loans from savings cooperatives is growing this year and conditions are more lenient than those of financial institutions.
Most savings cooperatives are reluctant to become NCB members because they are worried about tighter and complicated regulations, which could lead to higher cost, he said, adding that fear of legal punishment in case of business operation distress is also another reason preventing them from applying as credit bureau members.
Some savings cooperatives have sought ways to access a borrower's credit history by demanding NCB credit records for high-risk borrowers. The NCB has 98 members, three of which are savings cooperatives.
The bureau has spent two years educating and attracting savings cooperatives to become members. Many cooperatives have expressed interest in becoming NCB members in the future.
"On average, their cost of funds is around 4% per year," Mr Surapol said. "They charge borrowers in a range of 5-8%, while their guarantee is at least 6% return to members."
Credit inquiries for new loans at the NCB have increased since the third quarter last year to 70,000 transactions a month from 55,000 earlier.
Seasonal factors and the government's mortgage scheme for 1 million low-cost homes contributed to higher loan demand, Mr Surapol said.