'Picofinance' aims to eliminate loan sharks
published : 1 Mar 2017 at 13:00
writer: Online Reporters
NONTHABURI - The government has announced comprehensive plans to eliminate loan sharks and help debtors improve their lives.
At a picofinance launching event at the Muang Thong Thani convention centre on Wednesday, Finance Minister Apisak Tantivorawong said the government intended to eliminate informal lending to strengthen communities, reduce inequality and promote the grassroots economy.
Picofinance follows the government's nanofinance initiative launched in 2015 but involves even smaller loans and less stringent requirements for operators.
Mr Apisak said on Wednesday picofinance was now the government's solution to informal lending and the measures involved both debtors and creditors now that loan sharks were being seriously suppressed with severe punishments, he said.
With the scheme in place, needy people will have access to formal loans and informal lenders are encouraged to apply for picofinance licences, he added.
Government Savings Bank and state-run Bank for Agriculture and Agricultural Cooperatives have also lent altogether 10 billion baht to needy people so they don't have to turn to loan sharks. Each loan was capped at 50,000 baht and the interest rate was set at 0.85% a month or 18.83% a year.
As well, government officials are helping informal borrowers restructure their debts and educating them on financial management and job seeking so that they would finally be debt-free, Mr Apirak said.
Besides, government agencies were promoting community-based financial organisations to replace informal creditors, he said.
In the event, six registered picofinance operators received their licences.
According to earlier reports, a picofinance operator must have 5 million baht in registered capital. It can lend up to 50,000 baht per borrower without collateral with interest rates capped at 36% a year. Unlike nanofinance lenders which can extend loans nationwide, picofinance operators can lend only in the provinces where they are licensed for.
Under the nanofinance programme already in effect, a licensed lender must have registered capital of 50 million baht and can lend up to 100,000 baht per borrower without collateral. The maximum interest rate is also 36% a year.
To date, the nanofinance programme has not been very popular, possibly because of a relatively high registered capital requirement and the reluctance of operators to take risks, according to reports.
In contrast, loan sharks normally charge interest at 10-20% a month, or more than 100% a year.