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Published on April 16, 2008

Household incomes have steadily increased, but household debts have increased at a significantly higher pace over the past few years, with 63.3 per cent of households in debt last year - increasing from 56.3 per cent in 2000.

The debts were an average of Bt116,681 per household, jumping by 70 per cent from Bt68,405 seven years ago. The average household income rose only 53.6 per cent, from Bt12,150 in 2000 to Bt18,660 in 2007.

A study by Anuk Serecheta-pongse, an economist at the central bank, indicated that the debt would not have a widespread impact on the economy because 61 per cent of all debts were mortgages and for careers which would eventually generate income.

The accelerating household debts were a result of changes in population structure, low interest rates and commercial banks' active strategy in extending personal loans.

Anuk added that accelerating household debt was a widespread phenomenon in many countries, but in Thailand household debt accounts for only 16 per cent of assets, lower than 30 per cent in the United States, 27 per cent in Columbia and 18 per cent in the Czech Republic.

Moreover, average household debt to income has increased at a lower pace over the past two years - and lower than the inflation rate last year.  Average household debt was 6.3 times higher than household income last year, compared with 5.6 times in 2000, but lower than 6.6 times in 2006.

"The ability to repay the debt has not become much worse and household debt to assets is lower than that of other countries," she said.

Commercial banks' non-performing consumer loans amounted to 4.1 per cent of total consumer-loan credit at the end of last year, declining from 4.8 per cent the previous year. They were lower than total NPLs of 7.3 per cent.

According to Anuk, the repayment ability of low-income earners with low financial literacy, who mainly rely on loan sharks, is at risk due to their limited savings and poor financial assets.

The household-debt problem in the agricultural sector is more complicated than in other household sectors. Farm incomes are not under control and farmers depend on their income-generating land as collateral.

Anuk proposes that solving the debt problem should be aimed directly at troubled household groups as a priority. This should be done together with encouraging saving, improving financial literacy and facilitating access to appropriate financial channels.

"We should study the experience of people's banks abroad and apply it to solve the debt problem in the agricultural sector," she said.

Anoma Srisukkasem

The Nation