MICROCAPITAL BRIEF: Thailand’s Ministry of Finance Caps Microfinance Interest Rate at 3% Monthly, Sets Capital Requirement at $311k

Thailand’s Ministry of Finance has announced that beginning early in 2014, microfinance institutions (MFIs) will be able to apply for microfinance operating licenses from the Bank of Thailand, the country’s central bank [1] [2]. The maximum microfinance interest rate has been set at 3 percent per month, and loans to an individual borrower cannot exceed THB 100,000 (USD 3,110). MFIs will be required to have minimum capital of THB 10 million (USD 311,000) and will not be permitted to accept deposits. The regulations are aimed at increasing access to affordable finance for low-income borrowers while reducing their dependence on “loan sharks” that reportedly charge up to 20 percent per month. At present, the maximum interest rate that the Thai financial institutions can charge is 15 percent per year.

By Nisha Koul, Research Associate

Sources and Additional Resources:

[1] Bangkok Post, “Maximum rate for microfinance at 36%,” http://www.bangkokpost.com/business/news/375909/maximum-rate-for-microfinance-at-36

[2] The Nation, “Microfinance rate set at 3% monthly,” http://www.nationmultimedia.com/business/Microfinance-rate-set-at-3-monthly-30217762.html

MicroCapital Story, January 25, 2013, “Microcredit Regulatory Authority (MRA) of Bangladesh Plans to Lower 27% Microcredit Interest Rate Cap,” https://www.microcapital.org/microcapital-brief-microcredit-regulatory-authority-mra-of-bangladesh-plans-to-lower-27-microcredit-interest-rate-cap/

MicroCapital Story, January 20, 2013, “Thai Government to Add $2.6b to Village and Urban Revolving Fund,” https://www.microcapital.org/microcapital-brief-thai-government-to-add-2-6b-to-village-and-urban-revolving-fund/

MicroCapital Story, February 11, 2013, “Thailand’s Srisawad Money on Wheels Scales Down Microlending to Fresh-market Vendors, Shifts to Truck, Tractor Financing,” https://www.microcapital.org/microcapital-brief-thailands-srisawad-money-on-wheels-scales-down-microlending-to-fresh-market-vendors-shifts-to-truck-tractor-financing/

MicroCapital Story, October 25, 2012, “Government Savings Bank of Thailand Expands Microfinance Services in Border Areas,” https://www.microcapital.org/microcapital-brief-government-savings-bank-of-thailand-expands-microfinance-services-in-border-areas/#more-20721

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