The Finance Ministry is preparing to update a ministry notification regarding the operation of pico-finance businesses to offer greater consumer protection, says Fiscal Policy Office (FPO) deputy director-general Sumalee Satitchaichareon.
The FPO drafted an amendment to the Ministry of Finance’s notification in relation to supervision regarding microfinance at the provincial level, or pico-finance, and is holding a public hearing between Sept 6-20.
The amended notification aims to address the loan shark problem and increase protection for consumers from some brokers who charge higher interest rates in return for higher commissions from lenders.
The aggregated amount of interest, indemnity, service and other fees must not exceed the range of 28-36% of the loan amount per year.
Regarding the shareholder structure, shares must be held by people of Thai nationality and represent no less than 50% of the paid-up registered capital.
The amended notification governing pico-finance businesses also requires the licensed operators to operate the business within one year of the approval date and notify the FPO of the opening of operation in advance, according to the specified criteria. However, if no action is taken within the specified period, the licence would be invalid and the business operators must return the licence to the FPO within 15 days after being invalidated. Moreover, loans must be granted within one year of the date of opening the operation.
Pico-finance was initiated by the ministry to help eliminate loan sharks and encourage underground lenders to enter the formal lending system which helps low-income earners better access financial resources. As of June 30 this year, the net number of applicants for pico-finance who were granted permission and began providing the service stood at 1,114 in 75 provinces.
The amended notification also aims to address the changing business landscape of pico finance business such as more complex conglomerates, more foreign shareholding, and diverse services through various online channels.