Nano-finance loans would not contribute to higher NPLs

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BANGKOK, 27 October 2014 – According to the Bank of Thailand (BOT), the Finance Ministry’s concept of extending ‘nano-finance’ loans to help the grassroots people would not increase the number of NPLs in the commercial banking system.

BOT spokesman Jirathep Seniwong na Ayutthaya revealed that under this concept, commercial banks would be issuing loans to non-bank lenders who will then pass these loans to their customers. Each non-bank lender is allowed a maximum credit of only 100,000 baht and must provide collateral as proof of their ability to repay the loans to prevent them from defaulting on their payments.

Nano-finance loans carry an interest rate of 36 percent, which is higher than the 28 percent rate of the ‘micro-finance’ loan concept offered by financial institutions. Nonetheless, the BOT believes that the nano-finance loans would allow low-income earners to have easier access to obtain credit and provide a level of added protection to consumers.

However, the nano-finance concept is not related to the reduction of debt but it would ensure fairness and transparency in the loan-lending process.