New approach needed for farm debt
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New approach needed for farm debt

A booth operated by BAAC at a recent edition of Money Expo. Farmers who are customers of BAAC may be eligible for the debt repayment suspension. Nutthawat Wicheanbut
A booth operated by BAAC at a recent edition of Money Expo. Farmers who are customers of BAAC may be eligible for the debt repayment suspension. Nutthawat Wicheanbut

The debt suspension scheme for farmers fails to address the root cause of the debt problem, says Somporn Isvilanonda, a senior academic at the Knowledge Network Institute of Thailand.

He said over the past decade, several governments have implemented debt suspension measures for farmers, totalling 13 programmes, but farmers are still debt-ridden.

The current government measures do not include any methods to increase farmers' income, meaning they will remain stuck in a debt trap, said Mr Somporn.

As the debt problems of each farmer are unique and contextual, he said the government should opt for a targeted approach to ease their debt rather than a one-size-fits-all method.

For example, debt may be the result of a chronic illness, tuition fees, or non-productive farming.

China's poverty reduction policies were developed using a household survey on income, expenditure and living conditions by the National Bureau of Statistics, which helped to alleviate rural hardships.

In Thailand, the Bank for Agriculture and Agricultural Cooperatives (BAAC) could be used to conduct a survey on farmers' debt, said Mr Somporn.

In Vietnam, farmers adopted high-yielding modern rice varieties to improve productivity and income.

Rice output in Vietnam increased from 200,000 tonnes to 2 million tonnes per year over 10 years, while output per rai doubled from 500 kilogrammes to 1,000 kg per rai, which is higher than the average in Thailand.

The paddy price increased from US$370 to $500 per tonne.

According to the Puey Ungphakorn Institute for Economic Research (PIER), Thai farm households are indebted by an average of 450,000 baht, up by 75% over the past eight years, with 57% trapped in persistent debt (PD).

The research unit found of the 4 million farm debtors, 49.7% are classified as PD borrowers because of the inability to repay debt before they reach the age of 70.

Farmer debtors who entered the debt moratorium programme also have a significantly higher debt growth rate than those who did not join the programme, according to a study by PIER.

On Sept 26, the cabinet approved a three-year debt moratorium for farmers, which is expected to cost the government roughly 30 billion baht.

The first phase of the programme is slated to begin on Oct 1.

Farmers eligible for the debt repayment suspension are BAAC customers with total debt in all accounts not exceeding 300,000 baht as of Sept 30 this year.

Some 2.7 million farmers with a combined debt of about 300 billion baht are eligible to join the scheme.

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