Delinquent loans surged by Bt14.9 billion in the first quarter from the previous three months, bringing their share of outstanding lending up to 4 per cent, the Bank of Thailand reported yesterday.

Nawaporn Maharagkaga, senior director of the Financial Institutions Strategy Department, said the rising delinquency rate was a result of debtors' weakening ability to pay debts due to the global and local economic downturns.
This put pressure on the central bank to closely monitor the figure, as net non-performing loans also jumped Bt18.4 billion from the previous quarter.
"Normally, some debtors could not repay their debts for a few months. But not all delinquent loans would become NPLs," she said.
Lenders classify delinquent loans as NPLs when they are serviced for longer than three months.
She said the NPL outlook should improve along with the economic recovery, while lower interest rates should also ease the pressure on loan payback.
The Monetary Policy Committee will today consider whether the policy rate should be cut again. It currently stands at 1.25 per cent.
Finance Minister Korn Chatika-vanij said there was room to shift the key rate down another gear, as inflationary pressure remained subdued.
Delinquent loans were only 2.3 per cent of total lending in 2006. They had increased markedly in the first quarter of last year and hit 3.9 per cent in the last quarter of 2008.
Both gross and net NPLs escalated to 5.5 per cent and 3.1 per cent respectively in the first quarter, from 5.3 per cent and 2.9 per cent in the previous quarter. NPLs in the construction sector rose to 13 per cent of total loans, compared with 12.1 per cent in the fourth quarter of last year.
Property sector NPLs edged up to 11.6 per cent from 11 per cent, while manufacturing sector NPLs jumped to 9 per cent from 7.1 per cent.
The financial industry's credits grew 5.8 per cent on year, compared with an 11.4-per-cent hike in the fourth quarter of last year. However, they contracted 2.6 per cent on quarter, due to the thin growth of 0.8 per cent in consumer loans and a contraction of 3.7 per cent in corporate loans.
Loan growth could pick up if demand returned with acceptable risk, Nawaporn said. Lending factors have already improved from last quarter, such as fiscal policy and the first signs of a global economic recovery.
Banks have sufficient liquidity to extend more loans, as their loan-to-deposit ratio is only 84.1 per cent. They are also financially strong with an average capital adequacy ratio of 14.9 per cent and improved risk management.
Supak Sivarak, CEO of CIMB Thai Bank, has proposed to the government to introduce a "principal-free" programme for six months to help lower the burden on borrowers.

Source: The Nation
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Registration for the 6th Microfinance Training of Trainers Course is now open. Thais are encouraged to apply quickly as it is limited to 350 applicants. The Asian Development Bank Institute (ADBI) and the Tokyo Development Learning Center (TDLC) organize an annual training program for Asian applicants through online and video teleconferencing. As an added benefit, it is possible to take the course in the Thai language. The program offers training materials in English, Chinese, Khmer, Lao, Thai, Vietnamese, Mongolian, Bahasa and Japanese.

The course consists of 3 modules and special topics in microfinance. Topics include:
Describe fundamental concepts in microfinance
Design client-focused services
Apply effective microcredit methodologies
Describe the effects of the local environment on microfinance
Read financial statements
Measure delinquency
Identify key financial factors
Identify effective interest rate practices
Measure financial viability
Gauge institutional viability
Strengthen relations between donors and microfinance institutions

For more information, or to apply, visit the Tokyo Development Learning Centre.
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Newspapers and news shows on Thailand recently reported the arrest of company owners who were charging interest on loans above the maximum rate. Thai laws prohibit companies from charging over 15% on loans. This law is rarely followed and easily fixed by adding fees to loans. Most banks even charge rates higher than this. One particular bank is current offering "Speedy Cash" loans with interest rates of 28% per year. Unregulated lending companies charge considerably higher as the news article today states. In the province of Udon Thani, a registered company was offering loans with an interest rate of 2% per Day This equates to over 700% per year in interest charges. To read the full story, click on the following link: ThaiRath
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The Organization of American States is holding a training program at Kasetsart University in June on community-based microfinance. Participants from each of the member countries of the OAS will attend this program to learn about The six-week program includes topics ranging from self-help groups to financial ratio analysis. All participants receive a scholarship for a round-trip ticket, tuition and books in order to attend this course. For more information, please see this link.
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