17 September, 2009
BOT Opens MicroFinance Race
(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)
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)
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