Finance Minister Arkhom Termpittayapaisith has asked the Bank for Agriculture and Agricultural Cooperatives (BAAC) to restructure farmers' debts to reduce non-performing loans (NPLs) to 3-4% for this accounting year from nearly 8% year-on-year.
He said in addition to debt restructuring for farmers, the BAAC has implemented public service projects to increase productivity and generate additional income by providing loans to farmers' groups to grow short-term crops based on market demand.
The income is divided into three parts: 50% for debt repayment, 40% for further investment in farming equipment and 10% for group management fees.
Although this project will not generate large amounts of income like rice or coffee plantations, the additional income could become a key source of revenue in the future, said Mr Arkhom.
He said farmers' debts account for most of Thailand's high household debt. Over the past decade, debt moratoriums have been one of the most extensive policies used to help agricultural households.
Research concluded that while debt moratoriums could decrease delinquency propensity in the short term, they resulted in higher debt accumulation, especially among those with high debt. As a result, debt restructuring and preventing debts from turning into NPLs are a better way out of the debt trap, said Mr Arkhom.
The BAAC said it is prioritising solving household debt sustainably by promoting professional development and financial discipline, increasing production efficiency, supporting the processing and agriculture sectors, partnering with agricultural networks throughout the value chain, and driving innovation to increase the value of farm products to generate more income.
In the 2023 accounting year (April 1, 2023 to March 31, 2024), the bank aims for agricultural loans to expand by 35 billion baht, deposits to grow by 12 billion baht and NPLs to make up 6.7% of the outstanding loan balance.
In the 2022 accounting year, the bank recorded farming loans of 8.78 billion baht, with total loans of 1.63 trillion baht, up 3.05 billion baht or 1.90% from the previous year. Cumulative deposits tallied 1.82 trillion baht, total assets were 2.26 trillion baht, up 1.15%, while total liabilities were 2.10 trillion baht, a gain of 1.08%. Net profit in 2022 was 7.98 billion baht and the Bank for International Settlements ratio was 12.6%.
BAAC's Research and Innovation Development Center forecast the agricultural economy to expand by 2.4%, though exports are projected to decline as the economies of trading partners such as Japan, the US and Europe dip, while the baht appreciates.
In the second half of 2023, the El Niño weather pattern may affect the production of rice, maize and cassava, increasing the cost of animal feed.
Supporting factors include economic growth in China, which is the top importer of Thai crops, and state measures to raise income for farmers and maintain crop price stability.
