23 September, 2009
Local Foundation First to Test Microfinance Regulations
Sept 23, 2009
Recent announcements from the Bank of Thailand (BOT) have suggested that a new priority will be to promote the microfinance industry in the country. This is about to be tested by Common Interest Foundation who intends to transform its charitable microfinance program into a regulated microfinance operation.
While neighbouring countries, such as Cambodia, have seen its microfinance industry flourish in the past decade, Thailand has seen very little activity. Current Thai laws and regulations are considered too restrictive and too challenging to operate a viable microfinance program. Besides a few NGO programs, microfinance is conducted primarily through government programs such as the BAAC and Government Savings Bank. Not only have the laws stifled the microfinance industry, but many rural people are left to rely on illegal loan sharks who often charge interest rates as high as 20% per day.
To help correct this, the BOT has been developing new laws to help promote microfinance and to hopefully attract more from the private sector. Common Interest Foundation is attempting to be one of the first to respond and to legally register its microfinance operation in Thailand.
Common Interest currently runs a charitable microfinance program that helps rural villages to establish its own Village Bank. A “Village Bank” is a term used to describe an informal group of members from the same village, typically women, who save together each month and subsequently use their collective savings to provide loans to each other. Loans disbursed within each Village Bank are known as ‘Internal Loans’. Since Internal Loan demand usually exceeds the amount of funds available within the Village Bank, the group can request additional funds or ‘External Loans’ from Common Interest.
As a way to attract more funds to its program, Common Interest intends to transform its microfinance project into a Non-Bank Financial Institution. The new company will be run as a for-profit company but will have a strong social mission. Profits from the company will be channelled back to the foundation to help fund the foundation’s other charitable programs.
Current laws require the new company to have an initial capital registration of 50 million baht. This is substantially higher than what the foundation currently has. The foundation has sent a letter to the Governor of the Bank of Thailand requesting an exemption to this requirement on the basis that the new microfinance company will be a social company. Organizations and Investors will be watching this process to see if Thailand truly is opening its doors to microfinance.
For more information on this application, please contact:
Nittaya Den-Aksornkul, Program Officer
Common Interest Foundation
Tel / Fax: 053-855000 or 089-5558664 (Mobile)
Recent announcements from the Bank of Thailand (BOT) have suggested that a new priority will be to promote the microfinance industry in the country. This is about to be tested by Common Interest Foundation who intends to transform its charitable microfinance program into a regulated microfinance operation.
While neighbouring countries, such as Cambodia, have seen its microfinance industry flourish in the past decade, Thailand has seen very little activity. Current Thai laws and regulations are considered too restrictive and too challenging to operate a viable microfinance program. Besides a few NGO programs, microfinance is conducted primarily through government programs such as the BAAC and Government Savings Bank. Not only have the laws stifled the microfinance industry, but many rural people are left to rely on illegal loan sharks who often charge interest rates as high as 20% per day.
To help correct this, the BOT has been developing new laws to help promote microfinance and to hopefully attract more from the private sector. Common Interest Foundation is attempting to be one of the first to respond and to legally register its microfinance operation in Thailand.
Common Interest currently runs a charitable microfinance program that helps rural villages to establish its own Village Bank. A “Village Bank” is a term used to describe an informal group of members from the same village, typically women, who save together each month and subsequently use their collective savings to provide loans to each other. Loans disbursed within each Village Bank are known as ‘Internal Loans’. Since Internal Loan demand usually exceeds the amount of funds available within the Village Bank, the group can request additional funds or ‘External Loans’ from Common Interest.
As a way to attract more funds to its program, Common Interest intends to transform its microfinance project into a Non-Bank Financial Institution. The new company will be run as a for-profit company but will have a strong social mission. Profits from the company will be channelled back to the foundation to help fund the foundation’s other charitable programs.
Current laws require the new company to have an initial capital registration of 50 million baht. This is substantially higher than what the foundation currently has. The foundation has sent a letter to the Governor of the Bank of Thailand requesting an exemption to this requirement on the basis that the new microfinance company will be a social company. Organizations and Investors will be watching this process to see if Thailand truly is opening its doors to microfinance.
For more information on this application, please contact:
Nittaya Den-Aksornkul, Program Officer
Common Interest Foundation
Tel / Fax: 053-855000 or 089-5558664 (Mobile)
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