09 January, 2009
Why Microfinance in Thailand?
By Tamsin Harriman at the Common Interest Foundation
The regulatory environment for microfinance in Thailand is among the strictest in the world, yet the country has a great need for microfinance, and the MFIs that do operate here are successful. Microfinance has an important role to play in Thailand's development and eradication of poverty.
Many households in Thailand have moved out of poverty, and when one thinks of Thailand, one doesn't think of a destitute country. However, there are still many people who live in extreme poverty. In fact, the Microfinance Gateway found that fully 33% of Thailand's population live on less than US$2 per day. The poorest people in Thailand are mostly ethnic minorities, immigrants and Hill Tribe people, who are marginalized in society and do not have the same economic opportunities as the rest of the population.
Poor immigrants, usually from Myanmar, do not speak the language and do not have formal identification and thus cannot access any formal sector services, such as banking. These people often work as day laborers, for very low rates. Women often end up as "Mae Baan", live-in housekeepers, usually worked very hard for low wages and with very little time off. They also send a large proportion of their income home to their families, where it gets used for consumption.
Hill Tribes also have their own languages, and many live in the forests, the mountains and some of the worst areas of the country. Thus farming is difficult, as is travel outside their villages, so Hill Tribe people have very few income-generating opportunities.
In addition, there are many ethnic Thai villages that are still very poor, living in run-down houses without sanitary facilities and unable to send their children to school.
The Thai government has implemented some microfinance programs itself, and those have become quite widespread. The Thai government's commitment to microfinance is commendable. However, the government programs seem to mainly target the urban poor - for example, having branches only in the city centers - and may not be able to do enough for those outside the cities, where the poorest people often are.
This is where NGOs come in. MFIs such as SED, based in Surin (Northeast Thailand), and Common Interest, based in Chiang Mai (Northern Thailand), are proving to be very successful in assisting Thailand's poor. Both organizations use the Village Banking method, in which villagers own and run their own village bank (like a single-village MFI). This method is good for several reasons. Not only does it give borrowers a sense of independence and self-confidence, as well as training in business skills, it also gets around the regulations that apply to organizations owned by foreigners, making operation much easier, since the village bank's owners are Thai.
Nongovernmental microfinance institutions are very important and much needed in Thailand, as they can (and are willing to) reach the very poorest people, including ethnic minorities and immigrants. At the moment, there are few MFIs in Thailand, largely because of the strict government regulations of microfinance in this country. However, hopefully the Village Banking method - already proven successful in Thailand - or simply the fact that there are so many people here living in extreme poverty, can tempt more MFIs into coming to Thailand to expand upon the great work of those already here.
The regulatory environment for microfinance in Thailand is among the strictest in the world, yet the country has a great need for microfinance, and the MFIs that do operate here are successful. Microfinance has an important role to play in Thailand's development and eradication of poverty.
Many households in Thailand have moved out of poverty, and when one thinks of Thailand, one doesn't think of a destitute country. However, there are still many people who live in extreme poverty. In fact, the Microfinance Gateway found that fully 33% of Thailand's population live on less than US$2 per day. The poorest people in Thailand are mostly ethnic minorities, immigrants and Hill Tribe people, who are marginalized in society and do not have the same economic opportunities as the rest of the population.
Poor immigrants, usually from Myanmar, do not speak the language and do not have formal identification and thus cannot access any formal sector services, such as banking. These people often work as day laborers, for very low rates. Women often end up as "Mae Baan", live-in housekeepers, usually worked very hard for low wages and with very little time off. They also send a large proportion of their income home to their families, where it gets used for consumption.
Hill Tribes also have their own languages, and many live in the forests, the mountains and some of the worst areas of the country. Thus farming is difficult, as is travel outside their villages, so Hill Tribe people have very few income-generating opportunities.
In addition, there are many ethnic Thai villages that are still very poor, living in run-down houses without sanitary facilities and unable to send their children to school.
The Thai government has implemented some microfinance programs itself, and those have become quite widespread. The Thai government's commitment to microfinance is commendable. However, the government programs seem to mainly target the urban poor - for example, having branches only in the city centers - and may not be able to do enough for those outside the cities, where the poorest people often are.
This is where NGOs come in. MFIs such as SED, based in Surin (Northeast Thailand), and Common Interest, based in Chiang Mai (Northern Thailand), are proving to be very successful in assisting Thailand's poor. Both organizations use the Village Banking method, in which villagers own and run their own village bank (like a single-village MFI). This method is good for several reasons. Not only does it give borrowers a sense of independence and self-confidence, as well as training in business skills, it also gets around the regulations that apply to organizations owned by foreigners, making operation much easier, since the village bank's owners are Thai.
Nongovernmental microfinance institutions are very important and much needed in Thailand, as they can (and are willing to) reach the very poorest people, including ethnic minorities and immigrants. At the moment, there are few MFIs in Thailand, largely because of the strict government regulations of microfinance in this country. However, hopefully the Village Banking method - already proven successful in Thailand - or simply the fact that there are so many people here living in extreme poverty, can tempt more MFIs into coming to Thailand to expand upon the great work of those already here.
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