According to the government’s assets conversion
program, owners of non-transferable land titles; intellectual property
rights; machinery ownership and rental rights; and occupation rights to
public property can use these non-property assets as part of collateral to
apply for loans.
Prime Minister Thaksin Shinawatra hopes that the scheme
will give low-income earners more channels to access bank loans, which it
says will boost overall lending. Thaksin has said that the program will
provide a big boost for economic growth in 2004 would contribute to the
eradication of poverty in the kingdom within 6 years.
“Then there will be no more people living below the
poverty line of US$1 (42.9 baht) a day,” the prime minister said.
However, although local banks have paid lip service to
the idea, most banks are reluctant to accept non-traditional assets as
collateral. After the country’s financial crisis in 1997 Thai bankers
suffered huge loses when lenders defaulted, even under the traditional
lending practices. After the meltdown banks seized property assets which
became non-performing burdens for years. Now the most critical criterion for
loans is the borrower’s business plan.
Chatri Sophonpanich, president of the Thai Bankers’
Association, said that banks now view the viability of success in a business
and its cash flow rather than collateral as the determining factor for
The Small and Medium-Sized Enterprise Development Bank of
Thailand said it had initially decided to grant loans amounting to only 30
percent of the appraised price of intellectual property rights because of
their volatility, especially in the technology sector.
The government is putting pressure on the state-owned
banks to cooperate with the scheme. But they have already suffered huge
losses and mass defaults at this stage could leave them insolvent.
But the new scheme fits in with Prime Minister
Thaksin’s plans to revitalize the nation’s economy at the grass-roots
level, which include the people’s bank, the village fund, and debt
forgiveness for small farmers. (TNA)