Village Funds to be redefined

Village Funds to be redefined

The government has begun revising the Village Funds with a greater focus on teaching local communities to earn more income from new occupations and cooperate with the private sector in running their own businesses.

Pornchai Thiraveja, director of the Bureau of Microfinance Development, said Village Funds are a key source of financing, one that is accessible by residents of remote areas.

About 7% of the country's 70-million population have difficulty accessing financial sources.

The Village Fund scheme was initiated during the Thaksin Shinawatra administration to help low-income, grass-roots people facing financial problems and whose only recourse has traditionally been turning to loan sharks.

However, Finance Minister Thirachai Phuvanatnaranubala wants to reshape the objective and working process of the Village Funds to be more sustainable by educating villagers how to increase their incomes themselves and not rely on loans.

"The minister has so far directed us to arrange business matching between villagers and corporations, as these companies have experience with marketing and product development," said Dr Pornchai.

"As well, local villagers can serve as suppliers or farmers for factories. We should give them an opportunity to link up with business networks."

For example, Mitr Phol, a leading sugar miller and exporter, has started a "One Rai per 100,000 Baht" scheme that educates the sugarcane planters how to increase yields to 100,000 baht worth per rai.

The scheme was adapted from a Thai Chamber of Commerce project it designed for rice farmers. Villagers will have more income, while Mitr Phol will see its image boosted from its corporate social responsibility.

"We hope not to have to allot more money to the Village Funds. Their current seed money should be enough to support them in micro-businesses," said Dr Pornchai.

Villages' development levels are usually assessed by Village and Urban Community Fund Committees.

Dr Pornchai said indicators of development level include their balance sheets and readiness to be upgraded to juristic entities.

At present, 20% of villages are regarded as developed and 20% as underdeveloped, while 60% are at an intermediate stage.

The funds were originally set up with one million baht per village in 80,000 villages nationwide. This original 80 billion baht has expanded to 124 billion from interest accumulation and member deposits along with loans from the Bank for Agriculture and Agricultural Cooperatives for lending to fund members.

During fiscal 2012, the government will inject another 16 billion baht to villages nationwide under the SML (small, medium, large) scheme in which each village will be allotted 100,000 to 700,000 baht depending on population.

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