The Finance Ministry aims to increase the number of pico-financing lenders to 200 this year from 141 in an effort to give low-income earners better access to formal borrowing and shun loan sharks.
The 141 approved pico-financing lenders covering 40 provinces have already lent 42.2 million baht, with an average loan of 31,000 baht per borrower, said Krisada Chinavicharana, director general of the Fiscal Policy Office (FPO).
The Finance Ministry will focus on granting pico-financing licenses to operators in areas without such lenders to provide borrowing services across the country, he said.
Picofinance is a state measure meant to help lower-income earners access formal financial sources and stay away from loan sharks. Ministry criteria requires picofinance operators to have minimum registered capital of 5 million baht and confine their operations to a particular province. They are permitted to lend for general purposes and are limited to loans of 50,000 baht per borrower at a maximum rate of 36% a year.
The government has also formulated nano-finance to help alleviate the problem. Nano-finance operators can lend only for occupational purposes, with a lending limit of 100,000 baht per borrower and a ceiling interest rate of 36% a year, but they can provide lending services across the country. Nano-finance operators must have minimum registered capital of 50 million baht.
Apart from pico- and nano-financing services, the Finance Ministry has designated Government Savings Bank (GSB) and Bank for Agriculture and Agricultural Cooperatives (BAAC) to refinance underground loans owed by low income earners, particularly recipients of the state welfare and subsidy scheme, to address the loan shark problem.
Mr Krisada said that the Finance Ministry will propose that the government pay compensation of 40% for non-performing loans to the two state-owned banks when their loans to refinance underground lending turn sour in return for the lenient lending conditions.
He said that 1.2 million out of the 14.1 million people who sign up for the state aid measures in this year's registration round reportedly owed a combined 60 billion baht in principal and interest to loan sharks.
Both GSB and BAAC have been assigned to offer 5 billion baht in underground loan refinancing, while they have together lent 4.8 billion to 106,000 borrowers so far.
To allow low income earners easier access to loans, BACC has lent to community financial institutions to re-lend to the target group.
The state-backed farm bank requires members of these community financial institutions to have outstanding debt of no more than 8% of their credit lines. The financial institutions also must have been profitable for three years running.
BAAC will cap loans to community financial institutions at 1 million baht each and charge them a fixed interest rate of 5% with a five-year installation period.
