As I have indicated in a number of previous posts, there is a lot of hysteria about the one million baht village fund in Thailand. For many of the critics of Thaksin this program is typical of his government’s profligate populism. There is much talk of the money being misspent, mismanaged and misused. The so-called pro-democracy elitists seem offended that rural people are being given resources that they can manage themselves. Much of this discussion takes place in the absence of any detailed knowledge about how the scheme works at a local level.With a view to encouraging some more informed discussion, here are some facts and figures about one village fund (in Chiang Mai province) that I am a little familiar with.
- The scheme has 91 members (there are about 130 households in the village). The scheme is managed by a locally elected committee and has formal operating rules and regulations. Operational matters are overseen by an official in the District Office and financial matters are overseen by the local branch of the Bank of Agriculture and Cooperatives.
- In 2005 the scheme had a total capital of about 1.3 million baht. An initial one million was provided by the government (as it was to all villages in Thailand). The additional funds have been accumulated as a result of compulsory monthly “savings” of 30 baht per member; purchase by members of 10 baht “shares”; and reinvestment of a portion of the interest collected.
- At the beginning of 2005 there were 84 active loans. The average loan was about 15,000 baht. This is a modest loan in a village where household debts of 100,000 baht are relatively commonplace.
- During 2005 33 loans were fully repaid and 37 new loans were issued. About half of these new loans involved the direct purchase of agricultural inputs (seed) by the village fund itself.
- Interest collected during the year amounted to almost 60,000 baht (at a rate of 5 percent). This was used to cover the scheme’s operating costs, to reimburse committee members for expenses, to fund small scale local welfare initiatives (such as modest education scholarships) and to pay a dividend to shareholders. The balance was put back into the fund.
Of course, this brief snapshot does not amount to a detailed evaluation of the scheme (either in this village or anywhere else) but the figures certainly don’t paint a picture of unsustainable indebtedness or rampant profligacy. Instead the picture is of a rotating fund that is gradually increasing its capital. Perhaps they may encourage some critics to pause before condemning a scheme that they know little about. The scheme is not without its problems. There were real concerns in this village about how a previous committee managed some aspects of the scheme. But that committee was encouraged to resign and a new committee put in place. There are still grumblings about some aspects of the scheme’s management, but such grumblings strike me as a natural and desirable aspect of democratic local resource management.
7 responses so far ↓
1 New Mandala » Whose free lunch? // Nov 17, 2006 at 10:53 pm
[...] The Nation ramps up its selective attack on Thailand’s poor: What was wrong with Thaksin’s populist policies was that they were rife with corruption and they pandered to the unprincipled wants and needs of the beneficiaries. In many instances, cheap loans, such as those under the Village Fund, aimed to encourage villagers to develop entrepreneurial skills that would improve their livelihood. These loans were mistaken by the recipients for handouts, and were squandered on personal consumption instead of on profitable enterprise and community development projects that would raise their standard of living. [Would some evidence be too much to ask for? And I’m sure The Nation has never encourage personal consumption!] The government must implement a public education programme to explain to the people, particularly those who benefited from populist policies, why Thaksin’s dishonest methods and ruthless manipulation are bad for the country. Next, the government must carefully evaluate Thaksin’s policies and decide which should be continued, which should be reoriented and which should be scrapped. There is no such thing as a free lunch. [...]
2 Nicholas Wood // Nov 21, 2006 at 5:48 pm
I get very scared when I read these kind of articles such as the one in the Nation.
The issue was never whether the lending of 1,000,000 to a village was right or wrong, the issue was “How dare he give these people so much money”.
Bangkok is a small part of Thailand, but it’s economic power reaches to all power of the country. Thailand is a country in flux, I live up country and work in BKK and to hear factories in the provinces claiming they cannot find labour is a worrying situation. Bangkok is booming out of control, the city is grinding to a halt while the provinces are receiving less and less investment.
The ruling elite have to realise that there is life beyond Rangsit in Thailand and that only by investment in the provinces along with massive improvements in education will Thailand be able to continue growing.
Thailand can no longer rely on agriculture and textiles as a business. China will consume these industries completely and Thailand will be left behind.
The poor are suffering (farmers) and if Thailand cannot find a way to educate the next generation and accept that to be the worlds largest rice exporter is no great achievement, Thailand will be left behind.
The future is in technology and innovation, and without an educated populous this will be impossible to achieve. Where this money is all to come from, is not for me to say, however an estate tax would seem a logical place to start along with taxation of land.
The true wealth of the country is concentrated into the hands of very few families who pay relatively little tax in comparison with a middle class families – 30 to 60,000 baht per month who are struggling to make ends meet. Something must give.
I am not advocating making the pips squeak, but the tax burden on the middle classes is very heavy in comparison to their earning capacity, if the wealthy do not start to pay their share, social development in Thailand will become a forgotton concept whilst the drivers of BMW and MERC’s in Bangkok will continue to multiply.
3 tom // Dec 15, 2006 at 10:12 am
“During 2005 33 loans were fully repaid…”
That statement raises the question
How many of the debtors had to resort to money lenders to repay their village fund loans?
In Isaan this is not an uncomman occurance.
Unable to repay the village fund loan the debtor must put his land up as collateral with a money lender
and borrow the funds to repay the new loan, at 2% inreest per month.
Later once again unable to repay the loan the debtor loses his land.
But, the statistics for the program still show 100% repayment.
Until schools in Thailand teach money management the cycle of debt will only continue.
4 AJUH JOSHUA FON // Mar 17, 2008 at 6:10 am
Working with the rural poor in the North west Province of Cameroon, on Village micro finance and enterprise programme, i came to understand that farmers could be very much trusted, especially the rural poor farmers. One main reason for this is the fact that they depend on their agricultural products and at times incase they can not make enough money to pay their debts, they pay back in kind.
there are some groups already well organised and their internal loan system is already well developed. this makes these groups to be very much trusted. they have been working on smaller credits and could be very efficient in handling larger credits.
5 AJUH JOSHUA FON // Mar 31, 2008 at 11:30 pm
DEVELOPMENT FROM BELOW IS AN APPROACH I WOULD LIKE MOST COUNTRIES TO ADOPT. WHEN WE LOOK AT THE RURAL POPULATION, WE REALISE TAHT THE RURAL POOR HAVE A LOT OF RESOURCES AT THEIR DISPOSAL, THEY PRODUCE THE GREATEST OF THE GNP OF MOST THIRD WORLD COUNTRIES, BUT THEIR STANDARDS OF LIVING IS RELATIVELY VERY LOW. THEY ARE USUALLY DISCRIMINATED UPON. THERE IS NEED FOR THEIR SITUATION TO BE UPGRADED. MOST OF THE DEVELOPMENT PLANNERS SHOULD SEE THE RURAL PEOPLE AS AN ENGINE TO DEVELOPMENT. THIS WILL GO A LONG WAY TO DEVELOP THEIR COMMUNITIES AND IMPROVE UPON THEIR STANDARDS OF LIVING.
6 Thaksin’s village funds: “markedly pro-poor” // Aug 6, 2008 at 10:01 am
[...] The Nation’s report was referring to this study of the village funds undertaken by Joseph P Kaboski and Robert M Townsend. The report makes for much more interesting reading than the headlines suggest. It is a useful contribution to the evaluation of an important Thaksin-era program. All too often the local economic development policies of the Thaksin government are dismissed as populist initiatives in vote-buying, without any serious analysis of their positive and negative impacts. (For previous New Mandala discussion on the village funds see this post.) [...]
7 MBAH VASHTI AMBO // May 24, 2009 at 4:51 pm
i feel that the farmers, especially those who work in the rural areas can be trusted with debt. They are conscious and not always ready to be delinquents
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