Test applicants before doling out loans
All thanks to Citibank and Kenan Institute Asia for sponsoring the "Self-sufficient Teachers" project to improve the financial management expertise of teachers. I know that other financial institutions, including the Stock Exchange of Thailand and Bank of Ayudhya, have excellent programmes with similar goals.
Such projects are a win-win for all concerned. The participants make their hard-earned money go further and avoid loan sharks, the banks get fewer bad debts, and the stock exchange gets more prudent investors.
Debt levels are rising. The Ministry of Education says 1.1 million teachers are grappling with debt, owing a total of over Bt1 trillion. Surveys show that debts are increasing especially rapidly for those least financially sophisticated and who are least able to afford being in debt, who are the poor.
Thus, I suggest that before an applicant becomes eligible for a state-sponsored loan - for farmers, first-car buyers, purchasers of low-income housing, etc - the candidate must pass an exam in basic financial literacy. It should cover budgeting and debt management, as designed and administered by financial institutions with a vested interest in having clients who regularly pay their debts on time - the banks or finance companies, for example.
Let's empower the poor to remove their crushing burden of debt in a sustainable fashion.