Sept 23 (BangkokBizNews.com)

The Bank of Thailand (BOT) is organizing training sessions to teach local banks about microfinance. The BOT is promoting microfinance in its new Master Plan Phase 2 and is hoping that local banks will get involved. While foreign investors are familiar with the concept of microfinance, local banks are proving to be resistant to the idea and see it as too risky. The BOT is hoping that through a series of workshops, perceptions can change.
 0 comments

Microfinance is one of the key banking services the Bank of Thailand (BOT) plans to promote aggressively in its implementation of the secondphase master plan (2009-2013).

It would relax some regulaฌtions to attract commercial banks or new players to do the business.

The microfinance business would bring about not only financial access of low income people but also narrow national income gap. Many countries succeeding in the business have experienced in income distribuฌtion improvement.

The BOT survey found that 10 per cent of the Kingdom's household sector and small and medium sized enterprises (SMEs) could not access to the financial services.

"We want commercial banks to give loans to all kinds of peoฌple - both of high end and low end people in terms of income. Only medium and high income people can currently access to loans but low income and a very low income people can not be accessible to the service," said Bandid Nijathaworn, deputy governor.

Actually, some organisations such as cooperatives have already done the microfinance business. But they have limited types of business, inadequate liquidity and minimal business scale.

Commercial banks have high capital, but not enough customer information. So doing the microfinance business could cause credit risk in portfolio.

"The banks do not know how the customers are, but have the liquidity. The cooperatives know their members, but have only members' savings. So we try to find the way to tie them," said Bandid.

In the financial master plan, the central bank wants to connect the current banking system with the low income people via that are already in the business such as the cooperatives and funds. The connection would encourage the banks to do the microfinance business easier.

Bandid said the central bank would partly relax its regulation in a bid to attract the banks to jump into the market. The relax ation has to be under sound risk management system with international best practice.

According to the financial master plan, running the microฌfinance business could be done in three methods.

First, it would allow new domestic or foreign players who are expert in micro finance to do the business is a way to fill the gap in the banking system.

"We want new players to do business in the Kingdom in a bid to bring about valueadded in the industry," said the deputy governor.

Second, commercial banks would be allowed to establish affiliate companies to do microfinance business.

Third, the banks would be allowed to do the business with the third party such as cooperative which have known the customers well. The third party could be debt collectors or lending officers.

Bandid said the central bank would encourage the infrastructure development to faciliate the business - such as information system and technology.

The proper infrastructure would help reduce operating cost as the operators would have enough information to make business decision. This would result in low lending interest rates while debtors would have more choices to choose the products.

"If we do nothing, there will be a sector that can not access to the service," said Bandid.

By Anoma Srisukkasem
The Nation
Published on September 15, 2009
 0 comments

Sept 23, 2009

Recent announcements from the Bank of Thailand (BOT) have suggested that a new priority will be to promote the microfinance industry in the country. This is about to be tested by Common Interest Foundation who intends to transform its charitable microfinance program into a regulated microfinance operation.

While neighbouring countries, such as Cambodia, have seen its microfinance industry flourish in the past decade, Thailand has seen very little activity. Current Thai laws and regulations are considered too restrictive and too challenging to operate a viable microfinance program. Besides a few NGO programs, microfinance is conducted primarily through government programs such as the BAAC and Government Savings Bank. Not only have the laws stifled the microfinance industry, but many rural people are left to rely on illegal loan sharks who often charge interest rates as high as 20% per day.

To help correct this, the BOT has been developing new laws to help promote microfinance and to hopefully attract more from the private sector. Common Interest Foundation is attempting to be one of the first to respond and to legally register its microfinance operation in Thailand.

Common Interest currently runs a charitable microfinance program that helps rural villages to establish its own Village Bank. A “Village Bank” is a term used to describe an informal group of members from the same village, typically women, who save together each month and subsequently use their collective savings to provide loans to each other. Loans disbursed within each Village Bank are known as ‘Internal Loans’. Since Internal Loan demand usually exceeds the amount of funds available within the Village Bank, the group can request additional funds or ‘External Loans’ from Common Interest.

As a way to attract more funds to its program, Common Interest intends to transform its microfinance project into a Non-Bank Financial Institution. The new company will be run as a for-profit company but will have a strong social mission. Profits from the company will be channelled back to the foundation to help fund the foundation’s other charitable programs.

Current laws require the new company to have an initial capital registration of 50 million baht. This is substantially higher than what the foundation currently has. The foundation has sent a letter to the Governor of the Bank of Thailand requesting an exemption to this requirement on the basis that the new microfinance company will be a social company. Organizations and Investors will be watching this process to see if Thailand truly is opening its doors to microfinance.

For more information on this application, please contact:
Nittaya Den-Aksornkul, Program Officer
Common Interest Foundation
Tel / Fax: 053-855000 or 089-5558664 (Mobile)
 0 comments

Microfinance Gateway>Yunus Centre at Asian Institute of Technology to Focus on Non-conventional Ways to Tackle Poverty

Posted using ShareThis
 0 comments

(Translated from http://www.bangkokbiznews.com)

Tuesday, September 15, 2009

The Bank of Thailand opens the race for microfinance in hopes of granting ways for an additional 10% of Thai people to access financial systems. The new Master Plan Phase 2 embodies bold new moves that will support bank subsidiaries to work with third parties and will not fix an interest ceiling. Commercial banks will be required to keep their microfinance programs separate from its main operations. Evaluation will take place after the second quarter of next year.

After a year, the banks will have a better idea of the success of this plan. BOT’s master plan will also try to include small bank’s activities in order to make them strong with an expected increase in competition in the next 4-5 year. Thailand needs to be ready and able to compete in the new global financial environment.

To increase the financial performance, banks need to be effective, modern, diverse, accessible to the pubic and transparent. These changes will help Thai people to start choosing Thai banks for their financial services. This will support and provide added public benefit for Thailand and its financial system in the emerging era.

The new Master Plan will start in the 3rd Quarter of this year. It has been in progress since 2007 and is based on discussions with Thai and foreign banks. The purpose of the plan is to reduce costs of doing businesses and promote competition. By adding new players and liberalizing the environment, the role of the private sector will become more important in the role of developing society.

To develop entrepreneurs, they need infrastructure that provides low cost access to credit which is very difficult to do in the current situation. Servicing poorer clients takes more time and costs.

New Players Added

Part of the new Master Plan 2 is to add new players from abroad in the areas of microfinance and especially Islamic banking. People with microfinance expertise will be welcomed in the hopes of added more benefit to the system.

New players will not only be from abroad but will be Thais as well. A new generation of Thais will join this plan and they do not need necessarily need to be a bank but can be general companies. The increased competition and diversity will help to reduce the role of the state banks.

Mergers will be promoted. Smaller banks will be encouraged to join together. However, smaller banks also have unique positive qualities that make it valuable.

The Bank of Thailand wants to promote giving credit to everyone, not just the middle to upper class groups. Approximately 10% of all households currently have no access to financial services at all. They are usually poor and are considered high risk by commercial banks.

The Master Plan 2 is trying to fix the problem of people not having access to financial services. It wants to encourage lending to the poorer segments of society. It wants broaden the rules in order to make more credit-worthy.

MicroFinance Model.

Microfinance differs from country to country. It has been proven that microfinance is good for both the clients and banks. It is a win-win solution. A good structure will reduce costs for everyone and promote microfinance more. Rules and regulations need to be decreased in order for this to happen.

The Bank of Thailand is ready to review the laws to ensure that they do not impede business. The BOT wants at least 14-15 banks to start microfinance and provide more access to credit to poor people.

"The goal of Microfinance is to provide access to financial services so that people can have better lives.”
MicroFinance Regulatory Criteria.

Rules for microfinance must be more flexible than rules for traditional banks. Providing small amounts of credit to poor people require this to happen. Banks must set up subsidiaries to only do microfinance but it must be under the control of the Bank of Thailand. Third parties can be used to do collections.

Both Thai and Foreign banks are interested in this new model. If the plan is successful, it has the potential for high profits as well.

The Bank of Thailand wants this new change to happen as soon as possible. Microfinance already happens in Thailand – usually in the form of cooperatives but it is usually quite small. Microfinance has the opportunity to change the lives of many people and to increase their livelihood.

(Additional information not translated)
 0 comments