“Village Fund and Urban Community” project: Key mechanism to reduce inequality and strengthen the grassroots

business March 15, 2019

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Inequality is like a cancer, which has been deep-rooted in Thai society for many years. Although successive Thai governments have allocated budgets to tackle the issue, the problem has not been eliminated or improved over the years.

The Constitution of the Kingdom of Thailand B.E. 2560 is the country’s first version that prioritizes this problem.

“The society is peaceful and fair, and provides comparable opportunities to eliminate disparity,” is stated in chapter 16, National Reform, Section 257 of the B.E. 2560 Constitution.

Considering that the constitution alone may not be enough to bring about the implementation of practical and concrete solutions to inequality, the problem has been given priority as a “national agenda.” The government has laid down a national development strategy, focusing on combining the strengths of different sectors, including the private sector, civil society, communities and locals, to drive forward the strategy; supporting a gathering of people to think and act collaboratively for the benefits of the country at large; decentralization of authority to the local administrative level; strengthening self-managing communities; preparing Thai citizens to be ready in terms of health, economic, social and environmental aspects; developing quality citizens who are self-reliant and have the ability to contribute to their families, communities and society, as well as providing people with assurance to access quality state services and welfare equally and thoroughly.

The 79,598 funds across Thailand under the “Village Fund and Urban Community” project have played a vital role in solving the problem of inequality over recent years. This is cited in the “report on development in Thailand over the five-year period, from B.E. 2557 – 2562,” produced by the Office of the National Economic and Social Development Council (NESDC). The report revealed that the Village Fund and Urban Community project has helped generate income, as well as promoted savings, occupational development and a better quality of life for villagers. The villagers, therefore, are enjoying a more stable and happier life with an improved standard of living. The project has also brought down the ratio of household debt to GDP. At the household level, the project helped drive up the people’s income by 46.2% and their savings by 22.8%. At the community level, the project helped strengthen communities through occupational development and facilitation of welfare.

Looking into details, in the past three years, the government under the leadership of Prime Minister Gen. Prayut Chan-o-cha has earmarked a total budget of 70 billion baht for 79,595 funds under the Village Fund and Urban Community project. Carried out in line with the Pracharat policy, the scheme is subdivided into three major projects:

1. The project to strengthen the grassroots economy in line with the Pracharat policy, in which each of the 79,556 funds under the Village Fund and Urban Community project received maximum funding of 500,000 baht for basic community investment. The project received a total budget of 35 billion baht in the fiscal year 2016.

2. The project to boost the capacity of villages and communities to foster the grassroots economy in line with the Pracharat policy. This scheme received a total budget of 15 billion baht in the fiscal year 2017. The allocated budget was used to support the development of infrastructure to speed up the enhancement of people’s occupational capacity and creation of jobs, as well as generation of income to promote better living standards for villagers and communities. Each fund is entitled to receive a maximum of 200,000 baht per fund.

3. The Sustainable Village and Community Development Project, in line with the royal philosophy and the Pracharat policy, for the fiscal year 2018 aims to support infrastructure investment and solve urgent needs, promote employment, extend existing projects as well as carry out other activities that communities consider beneficial in supporting employment and professions. The project seeks to undertake activities aimed at reducing inequality and creating opportunities for the development of quality of life for sustainable development, as well as raising levels of income among the people. Funds for Village and Community Development must not exceed 300,000 baht per fund.

Assoc. Prof. Natee Khlibtong, Chief Executive Officer of the National Village and Urban Community Fund and one of the key persons responsible for care of the economy at the grassroots level, said that in the last three years, under the government and leadership of Prime Minister Gen. Prayut Chan-o-cha, the approach of the fund has changed somewhat. Originally, the village fund acted primarily as a public bank. Subsequently, it has changed to act as a source of revolving capital and a public village fund, helping create jobs and careers, and generating income for communities.

Nationwide, the fund has given rise to 25,000 community stores, 10,000 community drinking water projects, 56,000 agricultural extension programs, 45,000 consumer services projects, 37,000 public product developments, and 2,900 public marketing projects, creating revolving capital, employment and professional careers in villages and communities for more than 1.6 million people. The fund has generated total income of more than 39 billion baht with profits of 8.5 billion baht, and can be considered a new dimension in economic advancement at the grassroots level.

"In the future, the fund will develop in two ways. Firstly, an individual may lend finance to the members in order to establish a collective project. The government will not be able to provide finance for the fund every year so the fund will have to invest in order to generate benefits and income for the use and benefit of the community, which is the fund's goal and philosophy. There has been a question of whether these funds will simply disappear or not. However, the fund has confirmed to the government and to its members that it will not undertake simple one-year schemes. The projects launched in 2016 still exist and are still generating income, resulting in a return of about 40 billion baht and profits of about 8.5 billion baht within a period of just three years, using a budget of 70 billion baht to fund progress in our villages and communities."

However, the village fund does not operate with short-term goals only. On the contrary, the fund is looking forward over the next two decades with a village fund master plan formulated in accordance with the 20-year strategic plan. Each village fund throughout the country will detail how it sees itself in the year 2036, what form the fund will take and how it will reach that point. The national master plan will be applied at the sub-district, district and provincial levels to draw up the master plan for the national village fund, which will then be proposed to the government as a 20-year master plan, aimed at further advancing the fund and creating a future of equality for all.


Performance of Village Fund and Urban Community Project (as of December 2018)

79,598 funds have been established

Village Fund 75,000 funds

Urban Community Fund 3,860 funds

Military Community Fund 738 funds

Committee and members of the funds

12,864,576 persons

Committee 1,119,962 persons

Members 11,744,614 persons

More than 8,419 networks

Sub-District level 7,910 networks

District level 928 networks

Provincial level 77 networks

Working capital

368,235.28 million baht

Pracharat Village Fund Total Revenue 39,000 million baht Profit 8,500 million baht

Provide solutions to informal debt problem to 2,691 members with a financial amount of 124,554,699 baht


Strengthening grassroots economy through the Fund

Household level

Increase income by 46.2%

Increase savings by 22.8%

Decrease the household debt ratio to GDP

Community level

Provide welfare to communities

Promote more stable communities

Boost occupational development

Source: Office of the National Economic and Social Development Council