Helping poor settle debts

       The Finance Ministry's directive to the Government Savings Bank and the Bank of Agriculture and Agricultural Cooperatives that they tackle the protracted underground or illegal debt problem of the poor, is indeed welcome news - even if this is yet another populist initiative of the Democrat Party.
       Of course, whether this attempt by the government to help the poor bears fruit, remains to be seen.
       Of late there have been increasing news reports of debtors being badly beaten up by thugs after they failed to pay on time.
       Some desperate debtors even committed suicide because they could not stand the pressure of repayment deadlines imposed by loan sharks or their intimidation tactics.
       The example of a debtor taking out 10,000 baht from a loan shark and ending up servicing only the 20%monthly interest for years, with the principal still standing,is a common one among those who have fallen victim to the vicious cycle of underground debt.
       The debt problem has been identified as the most pressing issue faced by low-income earners in various occupations, and these debtors include government officials and state enterprise employees, according to a survey conducted in June by the Suan Dusit Poll.
       About 47% of the farmers polled admitted that their most worrisome problem was their debts to the BAAC and to loan sharks.
       For the two state-owned banks to start preparing lists of those in need of a refinancing arrangement would be too time-consuming. To expedite the process and make matters less complicated, the banks could simply update the previous lists of poor people prepared by the Interior Ministry during the Thaksin government.
       It will be remembered that in 2004 the Thaksin regime attempted to solve the underground debt problem of people in the low-income bracket.
       At the time, the Interior Ministry's debt settlement centre reported back to the Thaksin cabinet that it had brought together debtors and creditors for talks and managed to settle 97% of the debts owed by 1.6 million people, with total debt amounting to 108 billion baht.That was indeed a remarkable achievement.
       Given the results of the recent Suan Dusit Poll,which show that the problem of debt remains the most pressing worry for people in various occupations and professions, two assumptions may be drawn:1) the claim by the Thaksin administration was exaggerated;and 2) new debts have been incurred.
       One of the first challenges for the banks is how to convince lenders of these underground debts to come to the negotiating table and agree to a compromise settlement that would be fair to the debtors and acceptable to the banks.
       Since many of these creditors are known to be mafia figures with ruthless thugs in their employ, or are unscrupulous police officers who double as loan sharks,it is doubtful whether bank officials will be able to carry out the job effectively.
       In this matter, the involvement of officials from other agencies such as the Anti-Money Laundering Office, could be helpful and provide bank officials with some "teeth" to tackle the problem.
       But the biggest challenge will be how to prevent these "rescued" debtors from again falling into the trap of underground debt. Which means the government may have to explore ways and means that would allow low-income earners a less complicated and less expensive access to new funding.