March 19, 2013 00:00
By Wichit Chaitrong
Visiting Princess Mathilde of Belgium showed an interest in the development of micro-finance in the country but experts told her that easy access to credit and the lack of financial literacy had led to over-indebtedness among the poor.
The princess yesterday joined a round-table discussion on “Micro-finance Development in Thailand”, hosted by Asian Development Bank (ADB) in Bangkok.
She asked a question about over-indebtedness among households. The princess also suggested that micro-savings could finance education for the next generation.
Sukanda Lewis, ADB team leader for the development of a strategic framework for financial inclusion, responded that easy access to credit, especially from government programmes and non-bank financial institutions, had resulted in over-indebtedness in Thailand.
She said that Thai households could access credits from state-run banks, village funds and non-bank lenders. Part of the problem is that people do not know how to mange their loans, she said.
Thai households also save less. Household savings were 7.8 per cent of gross domestic product in 2011, which is low compared to other Asean countries.
Meanwhile, emerging East Asia’s outstanding local currency bonds in 2012 rose 12.1 per cent from the previous year to US$6.7 trillion, signalling ongoing investor interest in the region’s fast-growing economies but also raising the risk of asset price bubbles, said the ADB’s latest Asia Bond Monitor.
“Emerging East Asia is much more resilient than it used to be, but governments still need to be careful that the surge in capital inflows doesn’t fuel excessive rises in asset prices and that they are prepared for a possible reversal in the flows when the economies of the US and Europe pick up again,” said Thiam Hee Ng, senior economist at the ADB’s Office of Regional Economic Integration.
At the end of 2011, the outstanding was only $5.7 trillion. The corporate markets, though smaller than the government bond markets, drove the increase, growing 18.6 per cent year on year to $2.3 trillion.
Emerging East Asia includes China; Hong Kong, China; Indonesia; South Korea; Malaysia; the Philippines; Singapore; Thailand; and Vietnam.
According to ADB, investment is increasingly coming from overseas, with foreign ownership in most emerging East Asia local currency bond markets increasing in the second half of 2012. In Indonesia, for example, overseas investors held 33 per cent of outstanding government bonds at the end 2012, while foreign holdings of Malaysian government bonds had reached 28.5 per cent of the total at the end of September 2012.
The fastest-growing bond market in emerging East Asia in 2012 was Vietnam, 42.7 per cent bigger than at end 2011, largely due to the rapid expansion in the country’s government bond market. The Philippine and Malaysian markets grew 20.5 per cent and 19.9 per cent respectively, while India’s market expanded by a strong 24.3 per cent to $1 trillion. Japan still has the largest market in Asia at $11.7 trillion, followed by China at $3.8 trillion.
Governments in emerging East Asia are increasingly opting to sell longer-dated bonds – another sign of strong market confidence in the economies of the region – which is making them more resilient to possible volatile capital flows. This is particularly the case in Indonesia and the Philippines. Maturities tend to be shorter in the corporate bond markets of the region.