17 October, 2010
Economist Intelligence Unit Microfinance Report
The Economist has released it's annual survey of the microfinance industry this week. Thailand is no longer on the bottom of the rankings due to the Bank of Thailand's new regulatory framework. Here is where Thailand placed in each category:
Overall Microfinance Business Environment
50th out of 54 countries
Regulatory Framework
52nd out of 54 countries
Investment Climate
43rd out of 54 countries
Institutional Development
32nd out of 54 countries
The following is the report's summary of Thailand.....
Key characteristics of the microfinance business environment:
Microfinance in Thailand is generally a government-sponsored activity. Although there is a commitment to the provision of microloans through local “village funds”, this has stifled the development of private sector provision. The Bank of Thailand (BOT, the central bank) is keen on making changes, and has unveiled a plan affording opportunities to new and qualified microfinance service providers to enter the market.
That said, the BOT has yet to prove that it has developed the specialised capacity to regulate or supervise microfinance institutions (MFIs).
Under the Civil Procedure Code, an interest rate ceiling of 15% is in place for lending by unofficial financial institutions. In practice, lending rates by unofficial lenders are higher than this. The central bank has set a ceiling of 28% for combined interest and charges on all personal consumer and credit card loans; according to local commentators, this prevents some small-scale credit companies from offering microcredit. Other loans, such as corporate loans, are not subject to caps on interest rates
Large state-owned specialised financial institutions dominate the microfinance market. Since competition is constrained by government players, there has been no adoption of international accounting standards.
Key changes and impacts since last year:
Under the Financial Sector Master Plan (FSMP) Phase II for 2010-14, which was unveiled in late 2009, the authorities intend to relax some regulations to allow new domestic or foreign microfinance providers to set up operations. The new plan will also permit commercial banks to establish affiliate companies to provide microfinance and tie up with other operations (such as co-operatives) to provide services. The BOT and Ministry of Finance intend to consider new licences on a case-by-case basis, subject to applicants’ qualifi cations and the guidelines set.
Although the FSMP Phase II plan has been unveiled, the practical implications of the new regulations have not yet been detailed, and the stated plans have generally met with a negative response from existing microfi nance providers.
A state-owned specialised financial institution, the Bank for Agriculture and Agricultural Cooperatives(BAAC), is planning to launch a new Village Banking programme in 2010, with a loan fund of Bt3bn (US$93m) and which will offer subsidised interest rates. The introduction of BAAC is expected to further limit competition from small-scale private institutions.
For more details, visit the report on the Economist Intelligence Unit website.
Overall Microfinance Business Environment
50th out of 54 countries
Regulatory Framework
52nd out of 54 countries
Investment Climate
43rd out of 54 countries
Institutional Development
32nd out of 54 countries
The following is the report's summary of Thailand.....
Key characteristics of the microfinance business environment:
Microfinance in Thailand is generally a government-sponsored activity. Although there is a commitment to the provision of microloans through local “village funds”, this has stifled the development of private sector provision. The Bank of Thailand (BOT, the central bank) is keen on making changes, and has unveiled a plan affording opportunities to new and qualified microfinance service providers to enter the market.
That said, the BOT has yet to prove that it has developed the specialised capacity to regulate or supervise microfinance institutions (MFIs).
Under the Civil Procedure Code, an interest rate ceiling of 15% is in place for lending by unofficial financial institutions. In practice, lending rates by unofficial lenders are higher than this. The central bank has set a ceiling of 28% for combined interest and charges on all personal consumer and credit card loans; according to local commentators, this prevents some small-scale credit companies from offering microcredit. Other loans, such as corporate loans, are not subject to caps on interest rates
Large state-owned specialised financial institutions dominate the microfinance market. Since competition is constrained by government players, there has been no adoption of international accounting standards.
Key changes and impacts since last year:
Under the Financial Sector Master Plan (FSMP) Phase II for 2010-14, which was unveiled in late 2009, the authorities intend to relax some regulations to allow new domestic or foreign microfinance providers to set up operations. The new plan will also permit commercial banks to establish affiliate companies to provide microfinance and tie up with other operations (such as co-operatives) to provide services. The BOT and Ministry of Finance intend to consider new licences on a case-by-case basis, subject to applicants’ qualifi cations and the guidelines set.
Although the FSMP Phase II plan has been unveiled, the practical implications of the new regulations have not yet been detailed, and the stated plans have generally met with a negative response from existing microfi nance providers.
A state-owned specialised financial institution, the Bank for Agriculture and Agricultural Cooperatives(BAAC), is planning to launch a new Village Banking programme in 2010, with a loan fund of Bt3bn (US$93m) and which will offer subsidised interest rates. The introduction of BAAC is expected to further limit competition from small-scale private institutions.
For more details, visit the report on the Economist Intelligence Unit website.
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