Farm loans: Stepping stone or trap?

Farm loans: Stepping stone or trap?

Corn is a popular crop because it is a relatively low-labour plant. (File photo)
Corn is a popular crop because it is a relatively low-labour plant. (File photo)

It is widely accepted that farmers' access to financial resources is one of the key success factors to promote agricultural development. In fact, the Thai government has established many specialised financial institutions to serve such a purpose.

The basic idea is to grant loans to farmers to support their agricultural production, and at the same time, reduce their reliance on informal lenders who normally charge much higher interest rates.

Farmers, who had been indebted, should be better off with these loans and, in theory, should be able to manage their debts better than before. However, in some cases, what actually happens is that the total debt for each household barely decreases and, on the contrary, has a tendency to increase further.

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