BAAC's plans for an effective
debt suspension programme
for Thai farmers
By Jon Fernquest |
Today's Bangkok Post takes a look at the government's new debt suspension programme for Thai farmers.
(Photo on right of the household accounting booklet distributed to families by BAAC during its previous debt-suspension programme in 2005)
Taking into account in-depth personal information about defaulting borrowers and creating tailor made individualised plans to help farmers pay back their loans, is at the heart of BAAC's debt suspension programme.
In the US, the subprime crisis has been made worse by mortgage securities that make borrowers anonymous and faceless.
In the past, banks sat down and talked to borrowers.
An attempt to work out a plan was made before seizing (repossessing) the borrower's property.
The recent bundling of mortgages into securities in the US has prevented the individualised approach that the BAAC hopes to take in working out bad loans.
For society as a whole, land that is being used for something is more valuable than land lieing dormant owned by the bank.
After 1997 Thai banks had many unproductive pieces of land on their books for as long as a decade, doing absolutely nothing until they were eventually auctioned off.
Hopefully, BAAC's new approach will change all that.
Here is the article in full:
RURAL LENDING
BAAC to make farm debt programme more personal
PHUSADEE ARUNMAS & WICHIT CHANTANUSORNSIRIFriday April 04, 2008
The Bank for Agriculture and Agricultural Co-operatives (BAAC) is preparing to change its strategy for handling the debt suspension programme to ensure that farmers repay debts.
"The previous debt suspension programme was too generalised," said bank president Teerapong Tungteerasunun.
"Under the new programme, we are going to take into account in-depth personal information and family profiles of individual debtors so that the bank can help tailor-make the right management approach to enable them to repay their debts."
The cabinet this week approved five billion baht in funding for the new debt suspension programme, which mirrors a policy run by the state-owned BAAC in 2001.
The new programme aims to cover 340,395 problem farmers with debts to the BAAC of up to 100,000 baht each. Total costs for the two-year programme are estimated at 18.07 billion baht, which includes training expenses to help improve workers' skills.
The original programme, which ran from 2001 to 2004, involved 2.2 million farmers nationwide. The government set aside a budget of 15.2 billion baht over three years to finance lost interest revenues incurred by the bank.
"In the previous programme, the bank knew very little personal information about the individual farmers who were participating in the scheme," said Mr Teerapong.
He said that farmers' debt was often caused by illness and a shortage of labourers as the younger generation had moved away from farming.
"Certain farmers were found to be overspending, and in this case the bank is ready to help them with financial management."
Mr Teerapong said the bank would not impose decisions on farmers participating in the new scheme and that farmers would be at liberty to decide on the crops they grew.
"In the past, we admit that the bank's staff might have influenced decisions of the farmers in growing crops. For instance, rice farmers were recommended to quit growing rice, even though they had planted rice throughout their lives."
But Mr Teerapong said that under the new strategy, the bank would help the farmers to develop career management and administration through closer co-operation with both the Land Development Department and the Royal Irrigation Department.
As well, he said, local experts and scholars would be encouraged to share knowledge to improve living conditions and farming techniques, he said.
Mr Teerapong said the bank was also considering offering problem farmers other assistance, including both a seed fund and a water development budget.
Vocabulary:
Bank for Agriculture and Agricultural Co-operatives (BAAC) - Thai government bank specialising in microfinance and banking for farming households (See website, see FAO profile, profile at microfinance gateway)
suspension - delaying or stopping for a period of time
debt suspension - delaying the paying back of borrowed money
in-depth - deal with thoroughly, considering all aspects
defaulting on a loan - not paying money borrowed to the lender (bank)
tailor-made - made specially for a specific person or purpose
subprime crisis - an ongoing economic problem manifesting itself through liquidity issues in the banking system owing to foreclosures which accelerated in the United States in late 2006 and triggered a global financial crisis during 2007 and 2008 (See Wikipedia)
mortgage securities - an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans (See Wikipedia on mortgage-backed securities)
anonymous - nameless, not providing name
repossessing - when the bank takes back property it lent money for
bundling of mortgages into securities - taking a group of mortgages and creating a mortgage-backed security from them (See above)
lieing dormant - not active and being used at the present time
on their books - an asset owned by them, listed in the assets part of the balance sheet (books)
generalised - involving many different things, instead of just one or two
too generalised - involving too many different things
take into account Y - consider Y, include factor Y when you are making a decision
a profile - a description of a person, their life history
take into account in-depth personal information - use detailed facts about borrowers
debtors - people who owe money (farmers)
creditors - people who have money owed to them (banks)
family profiles - descriptions of the people in families
X mirrors Y - X has similar features as Y, X looks a lot like Y
mirrors a policy - looks a lot like that policy, has a lot of the same features
set aside - keep for a special future use (See glossary)
a budget - the plan for spending money during the next year (exactly how much will be spent on each different use and need; See Wikipedia)
set aside a budget for Y - assign money to use for Y in the annual budget of the company
incur a cost - purchase something for use in a business
incur a debt - owe money to someone
incur a loss - lose money in a business
lost interest revenues incurred by the bank - incur a loss (the bank does not receive interest payments on its loans)
X imposes Y on Z - X makes or forces Z to do Y
would not impose decisions on farmers - would not force farmers to act in certain ways
at liberty - free to act as they want
at liberty to decide - free to decide as they want
