Small business backs scheme
Entrepreneurs support Thaksin-era project as a good way to obtain loans; oppose government moves to close it
The government's unclear policy over the asset capitalisation scheme is being blamed for damaging small businesses.
Vithan Siribenjawan had been struggling for years until he successfully founded a small franchise business of Thai-traditional sweets under the brand "Wassana Nam Boran".
Recently he planned to use the brand's licence to obtain credit under the asset capitalisation scheme to expand his business.
Unfortunately, the plan is on hold after the interim government voiced its opinion against the scheme.
Deputy Prime Minister and Finance Minister MR Pridiyathorn Devakula had earlier asked specialised financial institutions to review a number of populist policies initiated by the government of deposed prime minister Thaksin Shinawatra, including the asset capitalisation scheme.
The scheme allows people who own land or machinery, occupy public land, or hold leases or intellectual property rights, to apply for bank loans by putting these assets up as collateral.
While the scheme's fate has been under consideration, the government ordered the Assets Capitalisation Bureau that oversees the scheme to be abolished before June.
"The small business is helping me to stand up again after my real-estate business went bankrupt during the economic crisis 10 years ago. Today, I see opportunities that the market for this kind of refreshment could grow but, as a small entrepreneur, where will I get money for investment? I see the asset capitalisation as the chance of my life," said Vithan.
Vithan was preparing a business-expansion proposal to apply for a loan from the Small and Medium Enterprise Development Bank of Thailand (SME Bank) when the junta took over the country. His plan was stalled when the interim government ordered the brainchild policies of the ousted premier to be reviewed.
"No matter how good or bad the ousted prime minister is, I regret that some good schemes might be terminated only because they remind people of Thaksin," Vithan said.
According to the government, the abolition of the Assets Capitalisation Bureau is based on its policy not to encourage people to go into debt.
The asset capitalisation scheme has been strongly criticised by economists because of its "easy credit" philosophy.
The government has also faulted the policy as inciting people to spend beyond their means.
According to the Assets Capitalisation Bureau, more than 336,000 working-class people and farmers received loans under the scheme between January and September last year. The loans cost over Bt73 billion and produced a ratio of non performing loans (NPLs) and defaults of less than one per cent.
The biggest lender under the scheme is the Bank for Agriculture and Agricultural Cooperatives (BAAC).
Arun Lertwilai, senior vice president of BAAC's personal loan department, said the bank lent Bt24 billion to 340,000 people under the scheme from 2003 to 2006.
More than 90 per cent of the BAAC's borrowers are farmers who used their title deeds, especially the Sor Por Kor 401 document, to obtain the loans.
"The scheme is good for farmers who have not much access to other financial resources," said Arun. "Without the scheme, they would be forced to return to loan sharks."
He also denied the accusation that the scheme had a high NPL ratio and made many poor people bankrupt.
According to the bank's records, the NPL ratio produced by the scheme was only 1.2 per cent, which is very small compared with general loans that produce about 5 per cent of NPLs, he said.
"Poor borrowers always have discipline and honesty in paying debts because they really know this is their last financial resource," said Arun, adding the BAAC will continue to give loans under the scheme despite the dismantling of the Assets Capitalisation Bureau.
The Government Savings Bank (GSB) has approved Bt600 million in loans to 8,600 people under the assets-to-capital conversion scheme last year. The number of borrowers increased from 5,600 from the previous year.
A GSB source said the bank views the scheme as a good way to help poor people. However, the bank has now stopped approving assets-to-capital loans in line with the government's order.
The SME Bank has lent Bt230 million to 500 people under the scheme, the NPL ratio is at the acceptable rate of 5 per cent.
A source at the bank said it would continue the project despite the political change.
Siripakorn Charoenphol, maker of a coconut jelly under the brand "Teacher A", said the scheme was good for entrepreneurs who want to turn their ideas into reality.
"This scheme could go along with the sufficiency economy if borrowers have responsibility and don't spend the money without thinking," she said.
In a related development, the National Economic and Social Development Board secretary-general Ampon Kittiampon will today propose that the Cabinet abolish the scheme's small-business mobile units. The units, launched by the Thaksin administration in 2005, was a joint project of the Assets Capitalisation Bureau and the SME Bank. Its role was to meet villagers in 75 provinces and advise them on how to secure loans from banks under the assets-to-capital conversion scheme.
The mobile units advised 17,000 people and approved 5,000 loans in two years.