RESTRUCTURE LOAN REPAYMENTS OR FACE ‘AWFUL DOMINO EFFECT’, SAYS DEBTOR CENTRE OFFICIAL
MORE THAN 1.5 million serving and retired government teachers and other educational personnel collectively owe Bt1 trillion to institutional moneylenders. Their appeals for help in repaying their debts cannot simply be ignored, officials warn.
“If these teachers are unable to repay, not only will the teacher savings cooperatives falter but also banks,” Debtor Centre secretary-general Kanlayanee Ruttarakarn told reporters earlier this month. “In that case, we may see an awful domino effect.”
She made the comment after a group of teachers issued a “Maha Sarakham Declaration” urging the Government Savings Bank (GSB) to offer easier repayment terms on loans from the Funeral Help for Teachers/Educational Personnel from Friends.
They threatened to encourage more than 400,000 other educators owing the fund money to halt their repayments.
The declaration drew condemnation, with critics saying teachers should be good role models for children and not be threatening to renege on debts.
But Somkid Homnet, head of the People’s Sector Network against Corruption, pointed out that the teachers did not want to default or intend to default. “They just want to communicate to the government the need to address their debt crisis in a proper way,” he said.
Launched in 2004, the Funeral Help for Teachers/Educational Personnel from Friends project has been both popular and reviled.
Loans have been approved over the course of seven phases, the first four generally problem-free because they dealt with loans of no more than Bt200,000 per applicant.
But the maximum loan amount has kept rising – Bt600,000 in Phase 5, Bt1.2 million in Phase 6 and Bt3 million in Phase 7.
“I want to call this a corrupt policy,” Somkid said, noting that some 485,000 teachers had been attracted by the amounts on offer, relatively low interest rates and attractive repayment terms.
If unable to clear their debts in one single payment, recipients need pay only the interest until they die, after which their outstanding debt is cleared with money from a funeral fund to which all members are required to contribute Bt1, or by applying their own life insurance death benefits.
“But when the loan amounts are so high, the teachers find they don’t have enough money after interest charges to cover their living expenses,” Somkid said.
He said the GSB, Office of Welfare Promotion Commission for Teachers and Educational Personnel, and Dhipaya Insurance Public Co Ltd were in charge of implementing Phases 5 to 7.
Welfare Promotion Commission acting secretary-general Pinichsak Suwannarung said teachers must buy life insurance to ensure their debts would be repaid after they die.
“And the premium over nine years is between Bt34,000 and Bt187,000, depending on the loan amount, which can range from Bt600,000 to Bt3 million,” he said.
If the applicant teachers have guarantors, though, there’s no need to purchase life insurance.
Uaychai Wata, president of the Teacher Profession Organisation Network of Thailand, said the government should reconsider its policy of requiring this insurance coverage when issuing loans.
He asked if there were some “irregularity” involved in having a private firm participating in the loan process.
He suggested that the government should treat the issue of teachers’ mounting debts as a national priority and pursue proper debt restructuring.
What it urgently needed is a one-year debt moratorium for the 4,000 teachers currently ensnared in a debt crisis, Uaychai said.
Instead, the GSB wants to sue the 4,000 teachers, who it says have poor repayment records with the Funeral Help loan scheme.
“I will meet with the GSB early next month,” Uaychai said. “I hope it will consider a one-year debt moratorium.”
Pinichsak said his office would try to contact the 4,000 teachers to explore solutions acceptable to both sides. In most cases, he said, the debts were slightly more than Bt1 million, though some owed up to Bt3 million.
The GSB pays his office a management fee to help implement the loan project, equivalent to between 0.5 and 1 per cent of the total loan amount.
“We have spent about Bt10 billion from that management fee to settle some of the default cases,” Pinichsak said.
“We have another Bt10 billion left and will use that to ease the interest burden on teachers who have good repayment records.”
About 480,000 teachers owed money to the Funeral Help for Teachers project, he said, of whom more than 370,000 had good repayment records. “So I must say that the majority of teachers do not intend to default, and they have good financial discipline,” hesaid.