People's Bank may become community bank

from the Bangkok Post

WICHIT CHANTANUSORNSIRI

The People's Bank microfinance programme, a key initiative under the Thaksin Shinawatra government, could be revived under the new government with the aim of transforming the branches into ''community microbanks''. The concept has already been floated by advisers to Finance Minister Surapong Suebwonglee. Under the proposal, the People's Bank programme could be separated from the Government Savings Bank and strengthened significantly to facilitate faster loan growth to low-income residents.

The People's Bank was set up to offer small loans of around 10,000 baht to borrowers to help support small business initiatives. Borrowers are obliged to establish deposit accounts to act as guarantees against their loans, a requirement that has helped to minimise non-performing loans under the programme at just 3% to 4% of total loans.

But lending operations have slowed in recent years to just 100,000 borrowers and credit of around six billion baht per year.

Under the new proposal, the microcredit programme would be transferred to a new agency to oversee operations. Front-office operations would leverage the branch networks of both the Government Savings Bank, the Bank for Agriculture and Agricultural Co-operatives and Thailand Post, a network which totals nearly 6,000 offices nationwide.

''We believe that under the new model, lending operations could quickly grow to 500,000 customers per year, with loans of 40 to 50 billion baht,'' one ministry advisor said.

''The idea is that we can more efficiently increase access to capital for communities.''

Officials also hope that by expanding the microcredit programme, low-income residents will be less apt to borrow from underground sources at ruinous interest rates. Under the original People's Bank programme, interest rates were capped at 1% per month.