The government is offering debtors ATM cards that they can use to withdraw money from state-owned banks as part of its effort to restructure the debts of cash-strapped individuals and small businesses, particularly those owed to loan sharks.
During yesterday's launch of the comprehensive debt-restructuring scheme, Prime Minister Abhisit Vejjajiva claimed it was fiscally sustainable and not motivated by short-term political popularity, as critics have claimed.
The government last December allowed people to register their debts and the Finance, Interior and Justice ministries worked on debt restructuring for them at the district through provincial levels by negotiating with loan sharks, he said. State banks also offered soft loans for them to refinance the debts.
The government has developed a microfinance system that will give people and small businesses access to credit. This project was carried out by the Finance Ministry and Bank of Thailand.
"It's wonderful that the Bank for Agriculture and Agricultural Cooperatives [BAAC] has succeeded in setting up the first community bank in the Phu Kradung district of Loei," Abhisit said.
Debt restructuring must be fiscally sustainable, he said. It must not be for the short term nor involve cash handouts or overly low interest rates. It must be done carefully and provide career training for people, he added.
Finance Minister Korn Chatikavanij said the debts owed to loan sharks had been transferred to six state-owned financial institutions - BAAC, Government Savings Bank, Government Housing Bank, Small and Medium Enterprise Development Bank of Thailand, Krung Thai Bank and Small Business Credit Guarantee Corp. These institutions had provided assistance to many debtors to refinance.
So far 412,741 debtors have got loans from state-own banks, while 75,066 cases are pending loan approval. There are 1.18 million people with combined debts of Bt122.67 billion registered with the government.
Each of the registered debtors carries debts worth Bt100,000 and bears an interest rate burden of 5-10 per cent per month payable to loan sharks. The state banks' rate is about 1 per cent. The debt-revamp project thus saves debtors Bt24 billion to Bt48 billion in interest payments annually, Korn said.
To promote discipline among debtors, the state banks have given debtors cards with a barcode that they can use to get cash from state-owned banks, excluding SME Bank and GH Bank, after repaying debts for 12 months. Each will be able to get up to 50 per cent of the first 12 months of debt repayment in emergency cash, he said. The banks will also offer them life-insurance protection.
For those who fall behind their payments, the ministry will seek support from the Labour Ministry to provide them job training, he said.
Luck Wajananawat, president of the BAAC, said the bank had extended the debt-repayment period for its customers to 15 years. While they service their debt, half of their debt will be suspended. When they pay off the first half in full, the bank will offer them a loan to refinance the other half.
The bank will also consider forgiving the debts of the poor whose earnings are less than 10 per cent of their liabilities.
The GSB has long provided loans to teachers and state officials to refinance their debts.