Thailand: The biggest microlender of them all

The biggest microlender of them all – The Economist, January 2, 2013
There are an estimated 120,000 microfinance initiatives worldwide but Thailand’s “Village and Urban Revolving Fund” lends more money to more people than any other. The scheme’s outstanding loan portfolio totalled $4.9 billion in 2011; the number of active borrowers that year stood at 8.5m. Those numbers are swelling. Yingluck Shinawatra, the Thai prime minister (pictured above), announced plans earlier this year to inject $2.6 billion in additional capital into a network of nearly 80,000 village banks, which her brother, Thaksin Shinawatra, who was prime minister between 2001 and 2006, created with a stroke of a pen ten years ago…
The scheme has undoubtedly helped financial inclusion and boosted rural credit. According to the Bank of Thailand, 96.5% of households have access to financial products. A 2011 paper by Joseph Kaboski of the University of Notre Dame and Robert Townsend of the Massachusetts Institute of Technology found that Thai households increased both their borrowing and their consumption roughly one for one with each dollar put into the fund.
But the scheme has its drawbacks. Private providers are unable to compete with the Village Fund on cost: Mix Market, a data provider, lists only one private microfinance lender in Thailand. Regulations and licensing requirements are so strict that non-governmental organisations have stopped setting up shop. Critics say it is a tool of political patronage…

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