The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) has set a budget of 10 billion baht for loans to a minimum of 1,000 contract farmers across the country next year.
The bank intends to help the contract farmers become leaders in assisting other farmers under their network, said president Apirom Sukprasert.
The BAAC already provides financial assistance to at least one contract farmer in each province.
Mr Apirom estimates that 2,000 farmers and 500 agricultural cooperatives have the potential to be leaders of contract farming groups, but they must apply the "fair share" concept to create more parity.
Contract farmers may be loath to change their traditional cultivation process because they are ageing and have high debt, so the best course is to design a model to prevent them from taking big risks amid crop price volatility, Mr Apirom said.
The bank will allocate a portion of the 10 billion baht in contract farming loans to agri-entrepreneurs who are not farmers but want to adopt new cultivation methods and add value to farm products.
Mr Apirom gave the example of an agri-entrepreneur who sells a sparkling drink made from dried coffee cherry after entering into contracts with growers in Chiang Mai's Doi Saket district to supply the raw material.
The agri-entrepreneur's production helps farmers raise their income by selling surplus dried coffee cherry.
The BAAC a year ago introduced 80 billion baht in farming SME loans with an interest rate of 4%. Some 30 billion baht in loans remains available under the scheme.
The bank is pushing to enlarge the ratio of farming loans to small and medium-sized enterprises to 40% of outstanding loans by 2020.
The move will comply with the government's policy of moving farmers upstream in the production process towards becoming value-added product makers.
Agricultural SME loans accounted for 3% of the BAAC's total loans in the financial year that ended March 31, 2017.
The loans were secured by 2,400 farming SME operators, or 32,000 when farmers under SME supply chains are included.
