“BUSINESS is great,” said Aoy, a moneylender who charges a whopping 10 per cent a month interest but finds plenty of takers in Thailand, where a huge pile of household debt is complicating the military government’s efforts to revive a sluggish economy.
Thai households are among the most indebted in Asia, and the official figures understate the problem due to the large sums also owed to loan sharks, estimated at as much as US$74 billion (RM237.4 billion).
When the army seized power on May 22, it justified the coup partly by the need to fix an economy driven to the brink of recession by seven months of political turmoil. But the growing debt problem leaves the central bank little scope to cut rates to support growth, while exports remain sluggish.
Banks have tightened their lending criteria as an increasing number of loans have soured, so many Thais have turned to loan sharks.
“I lend to small vendors or workers, quick money at a rate of 10 per cent per month, without collateral. It’s that easy,” said Aoy.
Her eye-watering interest rate was normal in the business, she said. Banks charge a maximum 20 per cent a year on credit cards and 28 per cent for personal loans.
Official figures from the Bank of Thailand put household debt at 82.3 per cent of gross domestic product at the end of last year, up from 77.1 per cent in 2012.
At 9.79 trillion baht (RM969 billion) at end-2013, the household debt was 76 per cent higher than in 2009, driven up by easy monetary policy and government stimulus measures that led consumers to splurge on cars, houses and electronic goods.
Household debt includes loans from several sources, such as banks, credit card firms, insurance companies and pawnshops.
The junta has said it will tackle the problem of loan sharks, but has not said how. The Government Housing Bank is to provide low-cost home loans until the end of the year, but only to customers with a good debt service record.
Cash is widely available on the Internet.
One advertiser calling herself Ree offers 24,000 baht in return for a new Honda Click motorbike she shows people how to buy with the help of a loan from a mainstream finance company.
There are no official statistics on lending by loan sharks, but the University of the Thai Chamber of Commerce has estimated total informal loans at 1.2 trillion to 2.4 trillion baht.
“High household debt can’t be cut very quickly,” said Siri Ganjarerndee, an independent member of the central bank’s monetary policy committee, adding the problem might be eased if the new government was able to boost growth and generate income. Reuters