Popularity contest: From village funds to people’s banks

opinion November 16, 2018 01:00

By The Nation

Proposed ‘people’s financial institutions’ could be a boon to the rural and the poor, even if they are an election ploy

In a last-ditch effort to win more support from rural people and other low-income voters in the coming general election, the Prayut government has expedited legislation to establish “people’s banks” at the tambon level to provide alternative financial services.

The bill, which is expected to be enacted by the National Legislative Assembly ahead of the national polls scheduled for late February, more than 7,000 so-called “people’s financial institutions” will be 


They will also serve as a major upgrade for the 70,000-plus village funds, which will be converted into people’s banks in their respective geographic areas. 

On average, a people’s bank will consist of about 10 village funds per tambon. 

Dr Kobsak Phutakoon, the outgoing PM’s Office minister, touted the people’s banks as a new way to give low-income people access to decent banking and loan services. For decades, the poor in both the urban and rural areas have relied on unregistered moneylenders to obtain quick loans, often at exorbitant interest rates. 

Meanwhile villages collectively have found it difficult to raise funds for community projects once the village funds set up in the early 2000s ran out of money.

In fact, the village funds represented a widely popular initiative the Thaksin Shinawatra government, which gave each of the 

villages an initial allocation of Bt1 million. 

The village funds were intended as a type of revolving credit facility for small community projects. However, many of them became ineffective after some village leaders turned them into personal loan facilities.

Yet a significant number of these funds remain successful to this day and hold the potential to be successfully upgraded as the proposed peoples’ banks.

According to the proposed legislation, in the initial stage, Government Savings Bank (GSB) and the Bank for Agriculture and Agricultural Cooperatives (BAAC) will step in to help manage each of the people’s banks. 

The proposed people’s banks can also serve banking agents for state-owned commercial banks to receive deposits from villagers and provide them with loans, in addition to 

payment and other financial 


The bill requires existing community funds, including the village funds, which have a combined deposit base topping Bt200 billion, to become people’s banks over a five-year period.

In this context, both the state-owned GSB and BAAC, which have a large number of branches in the rural areas, aim to extend their services via the people’s banks to help 

establish the new operators 


However, given the timing of this bill, it appears as if the Prayut government has resorted to another all-out effort to woo the voters in hopes of returning to power via the upcoming election, having run the country as an non-elected administration for four years.

Another pet project of the outgoing government is the Eastern Economic Corridor mega-investment programme, which has been touted in Thailand and abroad as a major engine of new economic growth. 

It too is designed to win votes, and it is also expected to build international confidence ahead of the general election.