OTHER
SOURCES OF FINANCE
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Finance companies cannot take deposits, but they can raise
funds by issuing promissory notes or similar instruments;
these, in turn, are lent to businesses and individuals.
Finance companies come into existence in 1969 and have grown
rapidly, reaching a total of 91 as of December 1993. Of
these, 20 companies are licensed to offer only finance services,
71 to provide both finance and securities services, and
13 to offer only securities services and 17 credit fonciers
companies. Finance companies are not subject to the same
interest rate restrictions as commercial banks on their
promissory notes, but are subject to the same restrictions
on lending rates.
Many finance companies also perform the
functions of investment banks by underwriting and marketing
the securities of private sector companies. While some of
the larger, finance companies have been moving towards term
lending ,the bulk of their assets are still concentrated
on short-term consumer financing and cheque discounting
services. With the passing of the Finance Business, Securities
and Credit Fonciers Business Act of 1979 and its revision
of 1983, all finance companies are to be authorized and
regulated by the Ministry of Finance and the Bank of Thailand.
Agricultural cooperatives are organized
by farmers for concerted efforts in agricultural activities
including the provision of credit to members, while savings
cooperatives are formed on an occupational basis with most
of the members being salary earners. The agricultural cooperatives
obtain most of their funds from the BAAC and lend them directly
to member farmers. The savings cooperatives, on the other
hand, obtain their loanable funds through a payroll withholding
system. The loans given by the savings cooperatives are
mostly for meeting current needs, or unexpected expenses
or for financing the purchase of consumer goods.
There are at present 12 life insurance
companies in Bangkok with branches throughout the country.
Of the different types of life insurance, endownment is
the most popular, accounting for about 80 percent of all
policies sold. The Life Insurance Act (1958) requires each
company to maintain security deposits of two million baht
and capital funds of five million baht. It also specifies
the various forms of investment into which life insurance
companies may put their funds.
Credit fonciers finance the purchase of
land or housing construction. They may not mobilize funds
from the general public but must rely on their own resources
or borrowings. There are at present 17 such companies, most
of them operating in Bangkok.
The Government Savings Bank is the only
wholly government-owned savings bank in the country. With
528 branches at the end of 1993, it has been very successful
in mobilizing household savings and invests over 90 percent
of its deposits in government bonds.
The Industrial Finance Corporation of Thailand
(IFCT) was established in 1959. Functioning along the lines
of a private development institution, it is the only industrial
development bank in Thailand. Its sources of funds at present
are borrowings from several institutions. namely, the Thai
government, the Bank of Thailand, the World Bank, the Asian
Development Bank, the Kreditanstalt fur Wiederaufban and
the Japan Export-Import Bank. During the past few years,
it has borrowed from the international market. Its capital,
retained earnings, and debenture issues also provide loanable
funds.
The IFCT makes term loans for financing
fixed assets and permanent working capital. Loans are repayable
up to 15 years but the average maturity is seven to eight
years, including a grace period of two to three years. In
addition to lending activities, it also provides specialized
services to industries and has introduced securities underwrtiting
services.
The Small Industries Finance Office (SIFO)
was established in 1964 as an office in the Industrial Promotion
Department of the Ministry of Industry. Its principal objective
is to provide financial assistance to small industrial enterprises
including cottage and handicraft industries. The SIFO's
source of funds is limited to government budget appropriations.
These funds are deposited with a government-owned bank,
which supplements them at a ratio of three to one. Medium
and long-term loans of up to one million baht are made at
low interest rates. Approval of loan applications is given
by SIFO, but collateral evaluation and lending operations
are undertaken by the government bank. In 1993, the operations
of SIFO were taken over by the Small Industry Finance Corporation
(SIFC), with increased loan ceiling up to five million baht
per borrower. The sources of funding are from the Thai Government
and financial institutions.
The Government Housing Bank, established
in 1953, is entirely owned by the government. Its basic
function is to provide financing facilities to low-income
families to obtain houses of their own. Its sources of funds
are borrowings fro the government, the Government Savings
Bank, the commercial banks, its own capital and retained
earnings, and limited savings deposits fro the public.
The Export Import bank of Thailand was
established in 1994. Its basic function is to provide medium-term
credit for agricultural export, long-term credit for capital
goods export, export insurance service, investment guarantee
for overseas investment of Thai investors and financing
small and new exporters without access to commercial bank
lending. The bank also finances import of machinery and
equipment used for export production and import of goods
beneficial to environment. Its source of funding is for
the Bank of Thailand and financial institutions, local and
overseas.
