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06 August, 2008

 

Report on Government Village Funds


A report on the Government’s Village Fund was recently released showing how effective it has been. After analyzing 960 households in 4 provinces, the report concluded that the government micro-credit scheme only increased consumption among villagers rather than being used primarily for income-generating activities.

For those not from Thailand, a previous government provided 1 million baht ($30 000 USD) to over 73 000 villages to start a micro-credit fund of their own. With an initial investment of over 2 billion baht (68 million USD), the fund has a default rate of 50%. Additionally, villages with the fund have seen an increase in interest rates from alternative sources in their areas. Could it be because people are forced to borrow from other sources in order to repay this loan? The report doesn’t address the topic.

Most non-governmental micro-credit organizations in Thailand have already transitioned their programs to include some kind of savings component. Not only does it improve repayments but it ensures that the poor benefit long-term. Loans are great for short-term improvements and can only work well long-term if it is coupled with a good savings program.

To read more about this report, click HERE to view the article.



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