Continued growth seen in co-op system if weaknesses addressed
February 08, 2014 00:00
By Yupin Pongtong
The cooperatives system last year posted net profit exceeding Bt62.6 billion, or 18.59 per cent of total revenue. But household debts outstrip savings in all segments of the system.
The projection for this year is for continuing growth as the agricultural cooperatives strive to boost investors’ confidence and specify plans to manage the system’s risks, according to the Agriculture and Cooperatives Ministry’s Cooperative Auditing Department.
Last year, the factors that raised the costs of production for various businesses were high prices of fuel and raw materials, along with higher wages and interest rate, crop damage from natural disasters, and political uncertainty. Such factors also weakened consumption and investment, but did not hurt the business and growth of the agriculture-cooperatives system.
Vinaroj Sarbsongsuk, director-general of the Cooperative Auditing Department, said the system comprised 7,203 offices nationwide, consisting of 3,972 agricultural-sector offices and 3,231 non-agricultural offices. There are 4,130 farmers’ offices, and more than 12 million members.
Cooperatives’ total equity was Bt2.06 trillion, and its borrowers added value totalling Bt1.98 trillion through their businesses, calculated to be 16.64 per cent of gross domestic product. Overall business growth was 5.18 per cent last year, compared with 10.18 per cent in 2011.
The cooperatives sector engages in five core businesses: lending (Bt1.22 trillion, or 61.47 per cent of all business), cash depository service (28.07 per cent), agricultural-goods depots and processing (6.19 per cent), sourcing and sales of various goods (4.18 per cent), and other services (0.09 per cent).
The value of businesses related to non-agriculture cooperatives is largest at Bt1.6 trillion, or 82.21 per cent, an average of Bt135.873 billion a month, followed by the agricultural cooperatives at Bt340 billion and farmers’ cooperatives at Bt12.69 billion.
The farmers’ cooperatives generated a total of Bt62.6 billion, or 18.59 per cent of total revenue.
Most of the cooperatives are quite financially sound with adequate capital strength, asset quality and competent management ability, according to the department. Of all borrowers, 97.93 per cent were able to repay their loans.
The cooperatives system has good internal controls, the department says. Management is able to control administrative and production costs, and strive to widen the gap between revenue and cost to boost profits.
The growth of household debts slowed last year while savings growth rose, as cooperatives members are becoming more cautious in their spending. The average debt in the agricultural sector was Bt19,251 per household, while savings stood at Bt14,662 per household. In the non-agriculture sector, debt stood at Bt294,653 per household, while savings averaged Bt260,426. The average debt in the farmer sector was Bt3,396 per household, while savings averaged Bt1,470.
The outlook for the sector this year calls for continuing growth if cooperatives can boost consumers’ and investors’ confidence, reinforce reserves to ensure financial stability, maintain quality of their loan portfolios, expedite debt collections, and be selective on borrowers and their ability to repay loans, the department says.
Furthermore, the cooperatives must try to cut costs when possible and continue to improve organisational efficiency as well as effective risk management to ensure continuing business growth and stability.