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Published on March 7, 2008

Deputy Prime Minister and Finance Minister Surapong Suebwonglee yesterday asked the Government Savings Bank (GSB) to cut its interest rate for clients under its microlending scheme known as the People's Bank.

Outstanding loans held by the GSB under the People's Bank scheme totalled Bt6.9 billion at the end of last year, loans to support the Village Fund totalled Bt14.22 billion, loans support Small, Medium and Large projects, or direct loans to villagers, amounted to Bt3.7 billion.

The GSB plans to increase its lending this year to Bt176.5 billion, It has set aside Bt71 billion to lend under its microfinance scheme to people who are normally unable to obtain loans.

Surapong said past repayment patterns showed the poor did not fail to honour their debts like some critics have said.

Detractors of the scheme argue a 10-per-cent loan-delinquency rate under the People's Bank scheme suggested it was a failure.

Meanwhile, the Small and Medium Enterprise Development Bank has asked the Finance Ministry to subsidise low interest rates for borrowers. Chairman Chakramon Phasukavanich said the bank had asked the ministry for Bt1 billion, of which Bt900 million would be used to offer loans at low interest rates and the rest for providing business advice to its customers.

He said if the ministry granted the bank's request, it could cut its interest rate for borrowers by 3 percentage points. The bank has also asked for Bt3 billion in new capital, to boost its lending capacity.

Deputy Finance Minister Pradit Pataraprasit did not confirm the additional funding but said he would make a decision within a month.

The bank has a high ratio of bad debts. Its non-performing loans (NPLs) are Bt10 billion, more than 40 per cent of outstanding loans.

Chakramon said the previous government's policy of directing state-owned banks to help boost the economy, initiated by the Thaksin Shinawatra government, had contributed to rise in NPLs. His bank has also been affected by fraud accusations from the central bank.

Wichit Chaitrong

The Nation